Latin American lags in access to financial services

(Caracas, December 7, 2011).- "Access to financial services is a decisive factor for economic development and social well-being," Luis Enrique Berrizbeitia, executive vice president of CAF – Latin American development bank - said in Caracas during the presentation of the seventh Report on Economy and Development (RED), entitled Financial Services for Development: Promoting Access in Latin America.

"The report offers new information on various aspects of the use of financial services, based on a survey carried out by CAF in 17 cities in the region," Berrizbeitia said.

After emphasizing the multilateral institution's mission of promoting the sustainable development of its partner countries, the CAF vice president said the seventh edition of RED was a contribution to the debate on the function of finance, particularly, access to financial services in economic development.

The study was presented by Leonardo Villar, vice president of Development Strategies; Pablo Sanguinetti, director of Socioeconomic Research; and Daniel Ortega, research economist, all from CAF. The commentators were Julio Pineda, head of research at the Central Bank of Venezuela; Juan Uslar, president of Bangente; Alejandro Sucre, president of Crecepymes; and Carlos Molina, IESA professor.

During his presentation Villar said the region was lagging behind in terms of access by families and businesses to financial services, and in terms of growth of credit. "The study found that, for the income level of Latin Americans, access and level of financial services should be much higher."

"For example, on average 51.3% of households in a sample of 17 cities in the region have opened 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 transaction in any financial institution. These access problems are repeated in almost all countries and cover a large part of the population, but are particularly serious for the poorest sectors," Villar said.

"The report identifies - Villar added - a series of specific reasons and policies which governments and financial institutions can implement to improve access and financial inclusion."

The publication highlights the important contribution that microfinance institutions (MFIs) have made to bringing services to large segments of the population and micro-enterprises in the region. MFIs combine elements of traditional banks with informal financial mechanisms and, to some extent, represent a "market" response to the immense demand which the traditional financial system has failed to meet.

"In some countries such as Bolivia and Peru, expansion of these microfinance institutions has been a very positive factor which has brought the services closer to large segments of the population and businesses" Villar said.