Report on role of financial services in Latin American development

(Quito, November 23, 2011).- Access to financial services is a decisive factor for stimulating economic development and the wellbeing of society, according to the latest Report on Economy and Development (RED) Financial Services for Development: Promoting Access in Latin America, a study released today by CAF - Latin American development bank – in which experts analyze the crucial role played by finance in the process of Latin American development.

The publication was launched by Krützfeldt Hermann, CAF director representative in Ecuador, together with Leonardo Villar, vice president of Development Strategies and Public Policy, and Pablo Sanguinetti, CAF Social-economic Research director.

Hermann said "to promote knowledge of the region, explore the problems that affect our countries and offer possible solutions are important contributions that CAF makes to development processes in LA. This study focuses on the various dimensions of the use of financial services in the region, considering that access to credit is a critical factor for economic development and the wellbeing of society."

The CAF Vice President for Development Strategies and Public Policy, Leonardo Villar, said the report provides new information on various dimensions of the use of these services based on a survey by the multilateral organization in 17 cities in the region.

"The results confirm previous estimates that suggest a low level of access to financial services in Latin America. For example, on average, 51.3% of households in a sample of 17 cities in the region have an account at some type of financial institution. Access to credit is even less common: only 12.3% of families have applied for and have a loan in a financial institution. These problems of access are repeated in almost all countries and cover a large segment of the population, but are most severe in the poorest sectors," Villar said.

CAF Socioeconomic Research Director Pablo Sanguinetti emphasized the important contribution of microfinance institutions (MFIs) in bringing services closer to large segments of the population and microenterprises in the region. MFIs combine elements of traditional banking with informal financial mechanisms and, in some ways, are a "market" response to the huge demand that the traditional financial system has failed to meet.

Sanguinetti noted that the "microcredit revolution" is based on the design of innovations which make historically excluded individuals into reliable borrowers, and marks a paradigm shift in the business of providing financial services.

However, he added, despite the progress of microfinance, the low level of use of formal credit sources by micro-entrepreneurs is still the case in the region, where only 14% of micro-entrepreneur families have a loan from a formal institution.

The event – held on November 21 in the Suissôtel – was attended by Pedro Solines, Superintendent of Banks and Insurance; Krützfeldt Hermann, CAF director representative in Ecuador; Leonardo Villar, CAF vice president of Development Strategies and Public Policy; Pablo Sanguinetti, CAF director of Socioeconomic Research. Also attending were Geovanny Cardoso, technical secretary of the National Finance Program; Andrés Arauz, banking general manager Central Bank; Pedro Arriola general manager Banco Procredit; Paul Arias, general manager CREDIFE, among other experts, who shared their experience and knowledge from a local perspective.