Diana Mejía
Jesús David Gutiérrez
Latin America and the Caribbean is the region that currently registers the largest migratory flows in the world. More than 41 million Latin Americans live outside their country of origin, making the region the one with the largest number of migrants on the planet. However, not all of them are the same. A good part are economic migrants who move motivated by job opportunities in other countries. Others are fleeing economic, political, social and climatic crises. Understanding these movements will bring necessary benefits for migrants, but also for the communities that host them.
In this context, financial inclusion emerges as an essential element, since it is a necessary condition for the economic insertion of migrants. Its importance transcends the simple administration of financial resources, since it constitutes a determining factor that influences the ability of migrants to integrate into new communities, contribute to economic development and forge a sustainable future for both themselves and their host countries. .
When addressing the migratory reality in the country with the most migrants welcomed worldwide, the United States, the Consumer Financial Protection Bureau (CFPB) has indicated that migrants face common financial challenges. These include restrictions on access to bank accounts and credit services, vulnerability to predatory practices, and challenges specific to refugees and newcomers, such as lack of credit history.
In the case of Latin America and the Caribbean, the financial capabilities surveys carried out by CAF for Colombia (2019), Brazil (2020), Ecuador (2020), Panama (2020), Paraguay (2020), Peru (2020), Uruguay (2020), Chile (2023) and Costa Rica (2023) allow analyze the differences in the characteristics of migrants compared to people born in the country of residence in relation to knowledge, possession, use and choice of financial products, as well as financial behaviors related to savings as seen in Graph 1, which shows the questions that are part of the financial inclusion index of the financial capabilities surveys carried out with the methodology developed by the OECD.
Graph 1
In the analysis of the aspects of financial inclusion, an average gap of 10 percentage points is observed in the possession of credit products between non-migrants (23%) and migrants (13%), as well as an average gap of 12 percentage points in the possession of financial insurance (24% and 16%). In addition, there is a gap of 12 percentage points in the ownership of payment products such as checking accounts and an average gap of 9 percentage points in the ownership of savings, investment or retirement products (44% and 35%, respectively). . These differences can not only affect migrants' savings habits and strategies, but also limit their ability to cover themselves in the event of possible financial shocks, with subsequent negative consequences on their levels of resilience and financial well-being.
It is worth noting that these gaps in financial inclusion not only represent an immediate challenge, but also generate long-term implications. The difficulty in accessing basic financial products becomes an obstacle to building a solid credit history, a crucial component for access to financing. This limitation can hinder long-term investment and economic development opportunities, perpetuating financial disparities between migrants and non-migrants in the country of residence.
Graph 2
Graph 2 shows the results of the financial inclusion index, which show an average gap of 14 points between non-migrants (36) and migrants (22). In Chile and Panama, these gaps are almost zero, and can be attributed to the existence of specific programs to improve the financial inclusion and economic insertion of the migrant population in these two countries.
In fact, in Chile the public initiatives of BancoEstado, such as the CuentaRUT, have been key. This account, accessible to migrants since 2018 from the immigration regularization phases, offers facilities such as money management, zero-cost money orders and transfers between associated financial entities, as well as in-person and online purchases in the country and abroad. The sending of remittances is also promoted and specialized services are provided through the Department of Immigration and Migration of Chile, focused on facilitating access to financial education products and programs for migrants.
In Panama, Microserfin, an entity of the BBVA Microfinance Foundation, and the International Organization for Migration (IOM), have implemented actions to strengthen the financial capabilities of migrants and refugees through training sessions that seek to improve financial decision-making and build positive habits for the financial health of migrants, such as accumulating savings, mitigating the impacts related to emergencies. and make productive investments that improve their livelihoods and contribute to the local economy through their ventures. On the other hand, the collaboration between UNHCR and Banesco during the pandemic resulted in the delivery of prepaid cards for humanitarian aid, guaranteeing safe distribution of aid and allowing a new means of electronic payment. The flexibility of several private banks in allowing the opening of savings accounts with a valid passport has facilitated access to financial products for migrants, as an alternative to the permanent residence identity document.
Graph 3
In relation to financial resilience, an average gap of 7 percentage points is observed between non-migrants (31%) and migrants (24%) in terms of the time they could cover household living expenses upon losing their main source of income. as seen in Graph 3. It is notable that in Costa Rica there are no gaps in this aspect of financial vulnerability. On the other hand, both in Panama and Chile, and similarly in Uruguay, average gaps are observed in favor of migrants, suggesting a relatively greater financial resilience in this group. In the case of Uruguay, this phenomenon could be related to the fact that average poverty rates of migrants are lower compared to the national average, according to a World Bank study.
Graph 4
Graph 4 shows the results of the index of financial well-being, which refers to the state in which individuals and families are able to satisfy their financial needs and obligations, can achieve financial objectives and cope with negative financial shocks, considering their current and future finances, and from a point of view subjective and objective. This index acquires values from 0 to 100 points and an average gap of 2 points is observed between non-migrants (35) and migrants (33). This disparity can be attributed to challenges faced by migrants, such as barriers to financial inclusion that could affect their ability to manage their obligations and feel secure about their financial future. It is highlighted that, in countries such as Uruguay, Panama and Brazil, the gap is in favor of migrants, pointing to a scenario where this group presents comparatively more solid financial well-being. In Uruguay, migrants stand out for their ability to cover expenses without borrowing and to support themselves financially for three months after losing their main source of income. In Panama, superiority is evident in the ability to face important expenses without loans, cover household expenses with their income and maintain themselves for more than three months without the main source of income; Furthermore, their high subjective well-being is due to the perception of not having too much debt, financial control and a positive perception of the economic situation, allowing them to aspire to their future goals. In Brazil, behaviors and attitudes of the migrant population stand out, such as being able to cover household expenses with their income and expressing satisfaction with the current economic situation.
In this same country, the refugee population has government protection, granting them the same benefits than any regular resident, including social assistance through monetary transfers. According to a study by world Bank, for the year 2020, 26% of Venezuelan migrants in Brazil who received social assistance such as conditional monetary transfers had a higher educational level, while only 12% of non-migrants who received this resource reached that educational level, therefore that factors such as government support and high educational levels could contribute to better levels of security regarding the financial future and economic insertion that are reflected in higher levels of financial well-being of migrants in this country.
Graph 5
In relation to the score of the financial capabilities index, Graph 5 shows an average gap of 1 percentage point in favor of migrants (55), and the case of only two countries where the average scores of migrants are lower than that of non-migrants.
When carrying out the analysis taking into account the time since the migrants arrived in the host country, an average gap of 5 percentage points is observed between non-migrants (54) and migrants with less than 2 years of residence in the country (49 ), while compared to the average score of migrants with more than 2 years of residence in the country (56), there is an average gap of 2 percentage points in favor of migrants. This result shows that to the extent that migrants become economically inserted in the host countries, they present better financial knowledge, attitudes and behaviors that influence better financial decision-making and better levels of financial well-being.
Taking into account the existence of these gaps in the financial inclusion of the migrant population and their families in the region, CAF organized the fifth edition of the Financial Inclusion Laboratory (LIF) 2023: digital solutions for the financial inclusion of the migrant population, with the aim of promoting the generation of viable technological solutions that help resolve the gaps in inclusion and financial education of the migrant population and their families in the following areas: i) solutions for improve the education and financial and digital capabilities of migrants and their families; ii) solutions for the design of financial products and services for migrants and their families; and iii) solutions with an impact on the entrepreneurial capacity of migrants and their families and the productivity of their MSMEs.
This fifth edition of the CAF LIF aimed to support technology-based ventures to respond to the needs in terms of inclusion and financial education of migrants, their MSMEs and families, through their participation in acceleration programs with Endeavor and Seedstars that will allow them to scale their business models and replicate them in other countries in the region.
For CAF it is very important to support the Fintech winners of the LIF, which are working on innovative solutions in different areas to achieve effective financial inclusion that generates positive impacts on the levels of financial well-being of the migrant population and their families.
