Access to Financial Services in Colombia: The "Unbanked" in Bogota
How to make financial services available to the low-income population of Colombia?
This report provides an overview of the state of financial access in Colombia. It discusses:
- The decline in access to financial services in Colombia;
- The decrease in the number of current and savings accounts per inhabitant;
- The lack of incentives for private banks to increase their level of intermediation and provide services to low-income clients;
- The challenge of increasing intermediation to the poor.
The paper finds that:
- Colombia's banks provide costly services mainly catered toward high-income clients;
- Financial exclusion is associated with lower education;
- The unbanked save and borrow largely in the informal sector;
- Home ownership rate is high, showing that the unbanked have the capacity to build assets and are therefore bankable;
- Location plays a role in financial exclusion;
- Financial exclusion creates welfare losses for the economy.
For improved access to financial services, the paper recommends:
- Regulatory incentives, supply and demand side initiatives;
- "Smart subsidies" to bridge the higher transaction costs associated with the low-income segment;
- The use of low-cost technology;
- Simple product solutions;
- The development of growth and income generating policies;
- Financial education;
- Governmental measures to increase demand for low-cost electronic banking services;
- Building a better financial infrastructure.
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