Paper

Understanding Latin America's Financial Inclusion Gap

Understanding the impediments to the growth of financial inclusion

This paper analyzes the the difference between the average financial inclusion for Latin America and the corresponding average for a set of comparator countries. It assesses, on a country level, four types of obstacles to financial inclusion: macroeconomic weaknesses, income inequality, institutional deficiencies, and financial sector inefficiencies. The paper also presents the results of an econometric analysis that was conducted to understand the reasons underlying low financial inclusion in Latin America. Key findings include:

  • Although the four types of obstacles explain the absolute level of financial inclusion, the particularly high levels of income inequality and institutional deficiencies in Latin America are the most important obstacles explaining the region's financial inclusion gap;
  • Analysis at the individual level, where characteristics such as age, sex, education, and individual income are included, shows that the probability of being financially included is significantly lower for an individual in Latin America than for someone in comparator countries;
  • Relative exclusion of the poorest individuals or those with the lowest levels of education is higher in Latin America than in comparator countries.

About this Publication

By Rojas-Suarez, L. , Amado, M.A.
Published