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Sunday, December 04, 2022

Financial Inclusion: Panorama, Perspectives and Trends

Financial inclusion is a common problem in Latin America and around the world. Learn about the big picture as well as the main obstacles.

Bogota November 10, 2022-. Today, 31% of the world’s population is completely out of access to financial services, mainly minorities and women below the poverty line.

This situation is due to factors such as ignorance of the sector, rigid composition of products and unfavorable regulatory environment. The first of these refers to the fact that the majority of the population has little or no financial education, making it difficult for them to choose the best option for finance or investing.

Similarly, most products are not designed to meet the needs of the unbanked population. A practical example is that credit offerings are focused on people who are part of the payroll or who can prove their income.

“In simple words, having a better financial education makes it possible to decide among the various savings and investment options on the market, which of those options is the best fit for each profile, as well as with respect to economic and social policies. takes a position in the country”, says Gustavo Méndez, the regional leading partner of financial services in Deloitte Spanish Latin America.

Similarly, the absence of a prudent regulatory framework for financial products and services does not provide an incentive for public and private banks to reach the bottom of the pyramid. In this case, excessive documentation discourages the most disadvantaged community from accessing the area.

Such data appears in the document “Interruptions for inclusion”. Unconventional Trends and Opportunities for Promoting Financial Inclusion in Latin America” ​​prepared by Deloitte, which describes the opportunities and weaknesses in the region.

What is the importance of financial inclusion in the world?

Financial inclusion refers to products in the sector that are affordable and relevant to individuals and businesses that were previously unable to benefit from them.

Achieving this is important, as it allows to streamline the growth of income, obtain financing for the development of companies, as well as save for various events and achieve personal goals.

In the world, this concept is becoming more and more relevant as moving forward means a reduction in poverty and the informal economy, as well as a lack of opportunities to access credit by gender.

“More than 55 countries have committed to implementing financial inclusion and more than 30 of them have initiated or formulated strategies such as Mexico, Guatemala, Honduras, Colombia, Ecuador, Brazil, Peru, Paraguay, Uruguay and Argentina. are,” he says. Gustavo Mendez.

Similarly, financial inclusion is related to the UN’s Sustainable Development Goals: no poverty, zero hunger, health and well-being, gender equality, good work and economic growth, industry, innovation and infrastructure and reduction of inequalities.

What is Panorama in Latin America?

According to the document “Disrupted Inclusion,” only 51% of adults have bank accounts, of which only 28% pay directly from them and less than 15% benefit from formal savings or loan services. Unconventional Trends and Opportunities to Promote Financial Inclusion in Latin America, created by Deloitte.

Similarly, only 45% of SMEs have access to financial systems in this sector, despite the fact that their contribution to GDP is 30% of the total compared to 60% of OECD economies as they generate 67% of jobs.

Another interesting fact is that before the pandemic only 45% of Latin Americans transacted online, although this figure has risen to 83%.

In this area, some of the main constraints exist are the lack of skills to understand and apply the basic concepts of personal finance, economic informality, and the absence of public policy incentives that create barriers to electronic commerce.

What is done in Colombia?

In this country, the main challenges of financial inclusion are the need to promote the penetration of these services in rural areas, improve the level of financial culture, bridge the gap between men and women, and promote the development of alternatives. come. of digital payments in small businesses.

To counter these problems, actions such as the Creation of the Banking Opportunity Program have been implemented, which aim to promote access to financial services for families in poverty, micro-entrepreneurs, small and medium-sized enterprises and entrepreneurs, so that poverty can be reduced. To promote social equality and encourage economic development in the country.

Similarly, progress is being made in the model of banking and co-operative correspondents with which there has been a demand to increase the coverage of financial services across the country. In this sense, Decree 222 of 2020 simplifies the scheme for the traditionally excluded population in rural and remote areas.

Another important aspect is the National Development Plan 2018-2022, which defined guidelines for targeting credit to small producers, youth and rural women.

In short, financial inclusion is a key issue for reducing poverty and inequality as well as integration of financial services with the daily activities of citizens.

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