Expanding the reach of financial services

Audience at the 12th GDN Annual Conference

Audience at the 12th GDN Annual Conference

The discussion held during the session, Financial Crisis and Financial Inclusion: What we know, and what can be done? shed light on potential alternatives for financing development in a post-crisis scenario. The event showcased various case studies from Latin America and Asia on policy options carried out to promote credit access to a wider spectrum of the population. In the session, determinants and alternatives for financial inclusion were thoroughly examined, as well as potential obstacles which countries could face when implementing credit-promoting processes.

Luis Ballesteros, Project Specialist and Researcher at Mexico’s National Civil Protection System, delivered compelling evidence on increased participation of poor households in the financial system. His investigation of India and Mexico conveyed an important message on the role of social capital in household decisions about insurance service purchases. Ballesteros argued that both countries had in place a range of feasible alternatives which hold potential for extending financial services to the poor.

He argued that the existence of social capital among the poorest populations might encourage them to access financial services such as insurance. His research in Kalhandi, India showed how low-income groups presented above-average insurance acquisition rates due to their being part of tightly-knit social groups.

New and innovative financial tools

Jaime Ruiz Tagle, researcher from Chile’s University, described different approaches that are available for promoting credit access at a household level in Chile. He explained that Chilean formal credit has been crowded out by informal credit. Ruiz discussed how financial inclusion has been achieved in Chile by means of new and innovative financial tools, such as Retailer’s Credit. This has proliferated all over Chile, offering a viable financial option for credit-constrained individuals.

This type of credit provides an accessible financing source for low-income individuals as its requirements are less stringent than other financing options, in some cases only requiring proof of salary. This makes it an efficient way of extending financial services to Chile’s population.

Ruiz argued that financing development is a feasible endeavour,  as illustrated by the Chilean case. His work suggests that everyone can access financing and that the real hurdles lie in the availability and cost of the credit.

To close the session, Joao Manoel Pinho de Mello, Professor at the Pontifica Universidade Católica do Rio de Janeiro, delivered a thorough discussion on the role of Banking in financing development. Pinho de Mello highlighted the development of alternative financing channels, such as Payroll Loans which deduct interest rates from employees’ payroll. These schemes are very popular in Brazil, and offer an effective and efficient alternative for financing development.

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2 Responses to Expanding the reach of financial services

  1. Pingback: Expanding the reach of financial services (via Global Development Network Blog) « 54pesos

  2. Pingback: Expanding the reach of financial services (via Global Development Network Blog) | Latinoamérica…puede

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