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Corona virus highlights the need for financial inclusion in Latin America

June 12, 2020

The COVID-19 pandemic coronavirus has shown the importance of democratizing the process of financial inclusion so that Latin American citizens can access and use financial services. even easier. Financial comparator The Best Deal explained this in an analysis signed by Melisa Murialdo that they shared with Cointelegraph in Spanish on June 10.

It should be noted that the Financial inclusion means expanding access to financial products and services for people without a banking relationship, in addition to financial and technological skills to improve their quality of life.

It is estimated that around 2.5 billion adults worldwide are outside the financial system. This means that 40% of the world’s population has no financial product, according to the World Bank. In Latin America, this percentage rises to 61%. In the analysis, however, Murialdo made it clear that it still remains the leading region in terms of regulation and infrastructure for financial inclusion.

Corona virus highlights the need for financial inclusion in Latin AmericaCorona virus highlights the need for financial inclusion in Latin America

Even according to the World Bank, 75% of people in the lower socio-economic class are without bank accounts and appeal to inclusion as a key measure to reduce poverty, increase prosperity and deal with the current crisis.

However, Murialdo wondered whether it is financial inclusion that is needed to reduce poverty or whether poverty reduction is really the key factor in increasing inclusion. The answer was: “COVID-19 stressed the importance of democratizing the process of financial inclusion so that all citizens can easily access and use financial services“”

He then pointed out that, according to The Economist Intelligence Unit, Colombia, Peru, Uruguay and Mexico are leading the global classification of environments that promote financial inclusion.

“The ranking covers 55 developing countries and is seen as the global standard when analyzing the context that favors financial inclusion through regulations and government policies aimed at increasing them,” he said.

Latin America and regulation

Latin America is a favorable region in terms of regulation, although according to Melisa Murialdo, analyst at online financial services company elMejorTrato.com.pe, the region generally faces several challenges, such as:

  • Poverty Alleviation

  • Reducing the regional financial gap

  • Investing in an infrastructure that improves connectivity to expand the use of digital banking in non-urban areas

  • Creation of an advanced cybersecurity structure

  • reducing banking costs, simplifying the use of electronic banking and improving the trust that customers are offered

He also emphasized this More than half (60%) of Latin Americans don’t save and those who do prefer to do it “under the mattress”. One of the main reasons is that due to their experience in the formal banking system, they do not have enough income to save them, and distrust.

Financial inclusion as a solution

Murialdo raised another question: Is financial inclusion the “remedy” against the economic pandemic caused by the corona virus?

“The current situation, which has forced the majority of the population to stay at home to avoid infection and spread of the coronavirus, offers the possibility to improve the electronic means of payment and consequently to stop the use of cash. Accelerate the democratization process of the financial Inclusion, ”he commented.

In this context he described it Spending on the digital channel tripled in Latin America, which stood out clearly in Mexico, Argentina and Colombia.

He therefore considered it important to assess how actively one can respond to the new challenges of the digital economy:

  • Improve logistics to avoid consumer disagreement

  • Ensure biosecurity with free shipping

  • Increase in the workforce required to avoid delays in delivery

  • offer products that meet the needs of the diverse population

  • Take advantage of the regulatory advantage in financial inclusion

Without neglecting analog supplements to reduce risk and maximize benefits, he said that The pandemic could increase the use of means of payment other than physical money as a consumption habit in society.

“Electronic platform trading will grow faster than traditional retailers next year as new digital consumers experience modality and the more established ones have increased their use during quarantine,” he said.

On the other hand, he said that Knowing how banks can take advantage of the opportunities offered by electronic trading will increase the number of people added to the financial system. because offering most products through technological channels in a moment of social isolation is critical.

“In order for them to compete with cash, the electronic payment methods provided by inclusion must not only be secure to avoid computer fraud, but also be accessible to the whole population, quickly and easily, without cumbersome bureaucratic procedures, an endless circle of passwords and Passwords are checks that, paradoxically, give the feeling of having exposed all of our privacy, discouraging the digitalization process of the population that the current moment requires, “he added

Education and work

Another problem to consider is that without education or job creation, the expansion of the population’s banking process will be insufficient. In this context, he said that the greatest obstacle in the world, especially in an emergency world, is poverty, especially the lack of opportunities to access decent life. because without work or economic income you ask, “What money will I save and give to an institution I don’t know if I don’t have one?”

Finally Murialdo considered: “Financial inclusion policies are effective when complemented by social employment and tax policies. Otherwise, the indicators may rise in the short term and show misleading results, as they will no longer be sustainable over time.“”

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