SUMMARY OF MICROFINANCE PAPER: “FinTech and Financial Inclusion in Latin America and the Caribbean”, by Dmitry Gershenson et al, published by the International Monetary Fund

This The article examines financial technology (fintech) in Latin America and the Caribbean (LAC), in particular: (1) whether fintech can increase financial inclusion; and (2) best practices for governments looking to use fintech to do so. Among the challenges, there are low levels of financial inclusion are associated with “institutional weaknesses, low levels of banking competition resulting in high cost of financial services, inadequate infrastructure and an overly restrictive regulatory environment”.

Based on their own calculations and previous literature, the authors consider the following metrics: 1) Have an account; 2) Use of digital payments; 3) Have a debit card; 4) Use of a debit card; 5) Internet payment; 6) Receive wages into account; 7) Receive government payment on account; 8) savings account; 9) Have a credit card; 10) Loan from a bank; 11) Use of a credit card; and 12) Paid utilities with Mobile.

Overall, the effects of fintech on financial inclusion in LAC are mixed. Although many indicators suggest improvement since 2011, progress is less pronounced in CLA than in most other regions of the data sample. Within the LAC, there is great variation between countries. For example, the debit card holding rate in Trinidad and Tobago is about six times higher than in Haiti. In Central America, the rate of having bank accounts is about 2.5 times higher in Costa Rica than in Nicaragua. The differences between the countries of South America are not so marked.

The authors argue that fintech can increase financial inclusion by both improving access to financial information and lowering the cost of financial services. However, since many people do not have access to smartphones, the internet, or both, fintech can increase financial inclusion gaps primarily by making it easier for people with higher incomes to obtain financial services.

Case studies conducted by the authors indicate that obstacles such as high lending rates, overly strict documentation requirements, and over-regulation have slowed the development of fintech and, as a result, financial inclusion. However, the authors suggest that “the adoption by governments in most countries of financial inclusion strategies and discussions on new fintech strategies” could have a positive impact on financial inclusion in the near future. In addition, the increase in the use of digital payments due to the COVID-19 pandemic, especially encouraged by government money transfer programs, could pave the way for better use of financial technologies.

This is a summary of an article written by Dmitry Gershenson, Luis Herrera, Frederic Lambert, Gray Ramos, Marina Rousset and Jose Torres; published by the International Monetary Fund (IMF); August 2021; 77 pages; available at

By Bradley Shulman, Research Associate

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