SAVINGS, PAYMENTS, CREDIT

Problem

Approximately 30% of households in Latin America and the Caribbean have bank accounts, and only about 20% of these use the financial system to save. Among low-income populations, usage rates are even lower, not only for savings but also for formal credit. Payment services through the formal financial system are more prevalent among low-income people, but these remain predominantly cash transactions. The high costs of reaching scale with the microenterprise segment, particularly among rural clients, and the lack of appropriate products tailored to the needs of low-income populations in the region are a barrier to their financial inclusion.

Objective:

The MIF aims to increase the availability of formal financial products and services –savings, payments and credit– tailored for the underserved, low-income population in the region.

MIF Solutions:

• Promote the development of appropriate business strategies –tailor-made products, such as liquid and planned savings, links to payment flows, financial education, targeted promotion, and use of technologies that can expand existing distribution channels– in order to improve the confidence of low-income people in the formal financial system and increase usage significantly.
• These business strategies will lower costs, increase the scale, variety and quality of financial services geared to low-income households.

Results and Impact:

• A large increase in the number of low-income people who access financial product or services, including sub-accounts through mobile devices and formal bank accounts;
• An increase in the number of LAC financial institutions with capacity to offer financial products and services to unbanked and under-banked low-income populations though payments or transfers;
• An increase in the number of LAC financial institutions using technology to augment scale and outreach, reduce costs, or improve the quality of financial services for low-income population;
• Successful new uses of technology for financial inclusion developed and packaged for adoption by financial intermediaries, and profitable technologies for financial inclusion models adopted in the region;
• Governments in the region having implemented recommendations provided through advisory services on improved access to savings, payments, and credit for low-income people;
• Low-income people using savings products, increasing investments for family and business needs and less vulnerable to economic shocks, thus improving their socioeconomic condition.
• low-income populations the tools to boost their incomes: access to markets and the skills to compete in those markets, access to finance, and access to basic services, including green technology.