| Abstract: |
Our study critically surveys financial inclusion in Latin American and
Caribbean countries, gauging access to both credit and deposit accounts by
poor households. Our review confirms some pieces of conventional wisdom in
this area, but challenges some others. Regarding the latter, we claim that (a)
Limited financial inclusion does not simply follows from unfair discrimination
against the poor, but to a great deal from a low demand for financial services
and scarce access for the population at large. In this sense, we argue that
supply-side constraints have a second-order importance; (b) Despite the
impressive progress of microfinance in recent years, stakeholders should avoid
overoptimism, rooted in an apparent over-advertisement of a few successful
cases. While a potentially powerful tool to fight poverty, microcredit must be
carefully targeted, and granted by highly specialized intermediaries under
commercially-oriented criteria; (c) Although financial inclusion is a social
matter, the private sector has provided more and better responses than the
public sector. Furthermore, these private programs have proven to be quite
profitable; (d) Recent experiences in several LAC countries hint that
governments can play a decisive role in coordinating financial inclusion
initiatives, leading normative changes, and supporting innovative banking
outreach strategies without engaging directly in credit allocation; and (e)
Governments, donors and intermediaries should make coordinated efforts to
assemble microdata and encourage sound impact evaluations comparable across
countries and time. A number of policy recommendations emerge from the
analysis. |