May 7, 2024
The use of digital financial services has experienced rapid growth in Central America, Panama and the Dominican Republic, with the share of adults owning mobile money accounts doubling from 4% to 8% between 2017 and 2021, a new study by the Inter-American Development Bank (IDB) shows.
Digital platforms facilitate savings, improve security and speed, and reduce costs associated with domestic payments and international remittances. This is especially relevant in a region where the most vulnerable households depend on remittances, according to the IDB’s report “Towards Greater Financial Inclusion for Development.”
The study highlights the number of mobile money account holders and digital payments, which points to greater financial inclusion of businesses and households in the region and constitutes a gateway to other financial products and services that are less dependent on traditional banking infrastructure.
Despite progress, the region still lags behind other parts of the world in terms of the adoption of digital financial tools and other policies that positively influence financial inclusion, such as the development of a national financial inclusion strategy, financial education, boosting competition, and improving the recovery rate of loans in the event of default. Other challenges are access to debtors’ credit information, administrative efficiency of financial institutions through the use of correspondents, and digital payment platforms.
Tomás Bermúdez, IDB General Manager for Central America, Mexico, Panama, the Dominican Republic, and Haiti, stressed the importance of financial inclusion for the benefit of businesses and households. “In our region, it is key to promote policies to boost the availability of and access to financial services, such as credit, savings, and payment of services, among others, that allow businesses to grow and households to invest in economic activities, education, and health,” he said.
Thirty-five percent of the region’s companies report being financially constrained, compared with 30% in Latin America, whereas financial inclusion among the region’s households is about 42% that of high-income OECD countries households. This average is the result of analyzing the availability, use and access to financial services such as ATMs, bank branches, accounts, cards, loans, savings and payment of utilities and salaries through a financial institution, among others. The region is below Latin America (61%), with the exception of Costa Rica, with 65%.
Opportunities for the region
The report includes proposals to deepen financial inclusion in the region’s countries, such as strengthening the development of new financial inclusion strategies, promoting financial education in schools at an early stage, and fostering digital financial services.
In this regard, Bermúdez commented: “The IDB Group has a long history of supporting financial inclusion in the LAC region through technical cooperation operations, loans and investments to facilitate access to financing for MSMEs, technology programs for informal workers, risk mitigation instruments for the private sector, and the development of digital transformation products. The FINLAC program was recently launched, an initiative to support governments and companies in promoting financial inclusion through a one-stop shop for the public and private sectors in Latin America and the Caribbean.
Find here the study “Towards greater financial inclusion for development.”