The goal of financial inclusion is to guarantee access to financial services and products for the entire population. In the region, focusing on inclusion and increasing the financial market can give us quick wins in our economic performance and well-being.
Talking about financial inclusion has become increasingly common in recent years, with companies, governments and civil society all mentioning its importance. The United Nations even considers it as an important element for the fulfillment of the Sustainable Development Goals. However, despite recognizing the potential of financial inclusion at both the individual and country level, it is not always prioritized in our region.
According to the World Bank, on average in the region, only 42% of the adult population has a bank account. The data show that there are significant lags in this area; despite the advantages of having a banked population and the need for economic growth, financial inclusion is not seen as a priority in national agendas. Could it be that, given the need for greater economic dynamism, financial inclusion could be prioritized?
Financial inclusion refers to the availability and accessibility of financial products and services for people and communities that have been systematically excluded from bank accounts, savings accounts, formal loans, insurance or payment systems. Inclusion considers that regardless of income level, gender, race, age or location, access to these products and services is available.
A review of some indicators shows that the levels of financial inclusion can be very contrasting from country to country. Thus, according to World Bank data for 2021, the percentage of adults with a bank account in Costa Rica was 68.49%, while in Nicaragua it was 26%, the two extremes of the region.
But financial inclusion is also a dynamic issue that changes as the financial sector changes. So now in the 21st century, when everything is moving towards digitalization, access to financial technologies is also considered as an element of inclusion. In this topic, Costa Rica again appears as the most inclusive when measuring the percentage of the population that has made or received a digital payment with 59.16%; in contrast, Honduras appears with 31.64% and Nicaragua with 21.37%.
Of course, financial inclusion is an important aspect of equity and the generation of opportunities for people. But it is also a driver of economic growth by enabling more people and businesses to access financial resources for investment and consumption. Increasing access to credit and other financial services can stimulate business dynamism and innovation, as there will be fewer barriers for entrepreneurs.
Expanding access to financial goods and services to the majority of the population also has an impact on poverty reduction. Low-income people can find financial solutions to formalize their assets, generate savings, access financing, or manage their finances. Digital crowdfunding platforms such as Kiva have been very successful in this segment.
But increasing financial inclusion is not simple; like any complex problem, there is no "silver bullet", rather there are a number of strategies that countries can follow. Some best practices suggest that expanding digital financial services, such as digital means of payment, can bring quick benefits in the short term. Something that Costa Rica has done with its mobile SINPE National Electronic Payments System, driven by the central bank, which during the pandemic was a key element in maintaining economic activity.
Costa Rica with this mobile SINPE has managed to position the use of digital payments in the 20% of the population with lower incomes. In contrast, Panama, the second in the region, has only 8.2% of use, according to World Bank data for the year 2021. Clearly the mobile SINPE has given Costa Rica an advantage in the region; although it still lags behind countries with high income levels where coverage is close to 60% on average, if we consider the indicator mentioned above.
Promoting this type of strategy requires adapting the rules to foster innovation, reduce entry costs, and improve the competitiveness of the financial sector. In addition, the approach must be based on a multi-sectoral collaboration scheme to facilitate coordination between companies in the financial sector, companies in other industries and regulatory entities. It is not an easy task, but in a region with an average economic growth projection of less than 4% in the coming years, strategies that accelerate the performance of the economy and generate welfare should be prioritized as soon as possible.
