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22/01/2018 0:00 - Business
Argentina moves forward to financial inclusion

Financial inclusion, a multidimensional concept that refers to the incorporation of individuals who do not participate in the formal financial system and to the extension of the use of the services it offers, has the potential for economic growth and to reduce inequalities. The development of a strategy to achieve it seeks to strengthen our country's commitment to the issue.

In recent years, and mainly after the 2008 crisis, financial inclusion gets an important place in the governments’ political agenda, at the same time that it began to be promoted by various international organizations. Financial inclusion is emerging as a priority for lawmakers and regulators in the development of the financial sector, with an increasing number of countries introducing comprehensive measures to improve access and use of personalized financial services. More than 60 countries have initiated financial inclusion reforms in recent years. Our country is not the exception. Since the beginning of this decade advances are being made in this area and, since the arrival of the new management, both in the Central Bank of the Argentine Republic (BCRA) and in the Ministry of Finance, financial inclusion has been proposed as a priority objective.

Financial inclusion is a fundamental axis for achieving inclusive growth, the lack of access to financial services affects mainly the most disadvantaged sectors. People with limited resources who want to carry out a productive project, invest in education or need to face an accident or loss, depend on their savings or other informal sources of funds, which are more expensive, insufficient and unsafe. This not only has impacts in terms of social equity but also in the global economy. At a macroeconomic level, financial inclusion increases savings, promotes investments, the expansion of the domestic market and, ultimately, favors economic growth and development (Beckerman and Chiesa, 2017).

Two important effects of access to financial services can be identified that contribute to reducing the vulnerability of the poorest segments of the population: the variability of consumption is reduced, using mechanisms that make it possible to deal more effectively with adverse shocks and achieve greater well-being, and the value of assets increases, productive physical assets or human capital also (de Olloqui et al., 2015).

Financial inclusion can be defined as the process by which access and use of formal financial services is maximized while minimizing the involuntary barriers perceived by those individuals who do not participate in the formal financial system (Carballo, 2016). The BCRA, in the definition of its financial policies, understands financial inclusion as the access and use of a wide range of financial services, provided in a sustainable and responsible manner.

Last July, the Financial Inclusion Coordination Council was created under the auspices of the Ministry of Finance, whose main objective is the preparation and implementation of a financial inclusion strategy for the development of universal access policies to banking and financial services. Furthermore, it is mentioned in the resolution that gave rise to the organization, the functions of articulating processes between the different public and private actors and integrating actions to favor financial inclusion in the planning of the different sectors or systems; propose the execution of specific programs and plans that develop the impulse to credit and microcredit, and financial education; develop a draft regulatory framework that facilitates the implementation of programs and plans throughout the country; and advise the National Executive Power on everything related to the implementation of public policies related to financial inclusion.

Last November, a bill that raised the need to develop a National Financial Inclusion Strategy (NFIS) was presented in the Congress. According to the World Bank, financial inclusion strategies can be defined as action roadmaps, agreed and defined at the national or subnational level, that the agents involved follow to reach the objectives of financial inclusion. Successful strategies coordinate efforts with key stakeholders, define responsibilities among them and establish a clear planning of resources, for example, prioritizing the objectives. A strategy can promote a more effective and efficient process to achieve significant improvements in financial inclusion, and is ideally prepared with the private sector to establish and achieve shared and achievable goals for financial inclusion.

Since 2010, more than 55 countries have signed commitments related to financial inclusion and more than 30 countries have implemented or are developing a National Strategy on Financial Inclusion, demonstrating the broad consensus on the importance of this topic. World Bank studies indicate that the pace and impact of reforms increase when a country adopts an NFIS. In Latin America as of October 2015, different countries had already implemented these commitments. These include, Mexico (2007), Brazil (2011), Colombia (2014), Ecuador (2013), Haiti (2014), Paraguay (2014) and Peru (2015).

The aforementioned project was included in the Productive Financing Act, which seeks to develop the capital market and already has a half sanction from Deputies. The main objectives of this law are focused on generating the bases to give strong support to SME financing; federally enhance the capital market; increase investor protection; enhance public offerings of shares; favor the development of the mortgage market and financial inclusion; lay the foundations for the promotion of long-term savings; strengthen the infrastructure of capital markets; and improve the independence and oversight capacity of the CNV.

The Inter-American Development Bank (IDB), one of the main sources of long-term financing for economic, social and institutional development in Latin America and the Caribbean, and which also carries out research projects and offers policy advice, technical assistance and training public and private clients throughout the region; has contributed to the preparation and design of the strategy and will finance its implementation with a loan of US$20 million for 25 years.

The program developed jointly with the IDB establishes as an objective to contribute to increase the access and use of financial services for households and businesses through: the strengthening of the technical and operational capacities of the providers of services and the institutional capacity of the government to develop policies of financial inclusion, and to increase access to credit for micro and small enterprises.

The starting point

According to Global Findex, the World Bank database on financial inclusion issues, for the year 2014 (the last one for which data are available) 49.8% of Argentines do not have a bank account, a variable that is used as a one of the main indicators in relation to the subject, mainly to the use of financial services. This figure is lower than the world average (61.51%) and the average for Latin America and the Caribbean (51.4%), where Brazil (68.12%) and Chile (63.3%) have a better performance, and is far from what was observed for the group of OECD countries (94.01%), the organization to which Argentina intends to belong. This proportion decreases if the analysis is carried out for the most disadvantaged sectors, given that within 40% of the lower income population, the percentage without a bank account reaches 55.6%.


But the mere fact of owning a bank account does not imply that an individual is financially "included", financial inclusion is a multidimensional category that refers to the access, use and quality of financial instruments, which means, that is determined by both on the supply as on the demand sides.

If the frequency of use is taken into account, the statistics prepared by the World Bank show us that, within the group of those who do have a bank account, the vast majority were only made between one and two transactions per month (92.3% and 71.3%, respectively). And, separated by income, only 6% of the first quintile of income makes more than two withdrawals of money.

Extending the information, only 26.6% of Argentines have a credit card and 44% have a debit card, which only 25.4% of them made some payment with it. Global Findex data also includes information about savings and credits. Based on surveys, it is estimated that 21.5% of Argentines made savings, but only 4.9% of them did it in a formal financial institution and 1.5% using an informal savings club. In turn, 19.1% made loans, being the main sources of these loans financial institutions (8.3% of the total population), stores and family or friends, in that order. Comparing these data with other countries in the region, it can be seen that in Brazil, 12.3% of those over 15 made savings and 11.9% took loans from a formal financial institution. In Chile 15% and 15.6% respectively, in Peru 12.3% and 11.2%, in Uruguay 12% and 21%, in Colombia 12.3% and 15.6% and in Mexico, 14.5% and 10.4%. This shows that, although use in the region is limited, Argentina is lagging behind.

In order to shorten the distance, both real and perceived, that exists between the financial system and the population, it is necessary to promote the education regarding financial matters. Financial education is a key element for financial inclusion since it facilitates the efficient use of financial products, it can help people to develop the skills to select and acquire the instruments that best suit their needs, and, in addition, empowers them to exercise their rights and responsibilities as agents within the financial system. According to the Development Bank of Latin America (CAF), financial education policies are being consolidated as timely and relevant solutions, insofar as they are aimed at meeting the needs of both the growing middle class and the poorest sectors, while positively impacting the participation of individuals and households in financial markets and, in general, in economic development. These policies should take advantage of the many existing ways to inform and educate potential investors, ranging from schools to the mass media, while industry participants can play a role in this process. In 2016, the BCRA took the initiative in this aspect by signing an institutional agreement with the Ministry of Education to promote financial education.

Another important issue is that there should exist an offer of financial products and services that provide value to users. Potential clients that are excluded from the formal financial sector will not resort to it unless the instruments are easy to understand, use and access, and contain a relevant value proposition.

The promotion and pursuit of financial inclusion have the potential to be a key tool to promote equitable development and equal opportunities for all individuals in society, also allowing progress on objectives such as poverty reduction, creation of employment, the formalization of economic activity and gender equality. That is why financial inclusion has been included as a facilitator for the achievement of some of the 17 Sustainable Development Goals (SDGs) of the UN’s 2030 Agenda for Sustainable Development.


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