For the development industry in recent years financial inclusion has been something much sought after. So from that perspective, what has been going on in Latin America and the Caribbean over the past few years ought to be really positive for the region’s economic prospects.
Since 2011, World Bank figures suggest, more than 60 million people — more than 12 per cent of adults in Latin America and the Caribbean — have opened bank and mobile money accounts. In 2014, 236.9 million adults had such accounts, up from 169.5 million in 2011, according to figures published recently by the World Bank’s Global Findex survey.
The growth of mobile services has been especially striking. Last year Latin America and the Caribbean grew more quickly than Africa — hitherto the fastest-expanding region — with registered mobile money accounts up 50 per cent year-on-year to 14.9 million, according to a May report published by GSMA, a leading association of mobile operators.
The problem is that too few of the newly banked appear to be using their accounts for much more than withdrawing cash. Governments in countries such as Argentina, Brazil and Venezuela have given significant impetus to the expansion by delivering social welfare payments electronically.
It is no coincidence that the fastest growth in “bancarisation” has come not from more market friendly Mexico or Peru but in Argentina and Venezuela, where the banking system is largely state-owned. Much of the expansion in Central America and the Caribbean has come in the still limited mobile money sector.
Relatively few new bank account holders seem to be any more able to borrow, save money or buy insurance with their accounts, actions that would arguably give them more of a stake in their societies’ futures and therefore promote social inclusion.
Recent research by Latam Confidential (LC), a Financial Times research service, highlights the dilemma. In a survey of 6,500 consumers in six countries conducted in February and March this year, 77.9 per cent of respondents said they had an account in the first quarter of 2015, up from 76.3 per cent when the survey was last conducted in the first quarter of 2014.
But fewer people were using their accounts to save money and, although there was a marginal uptick in the use of savings accounts in Brazil — where interest rates have been rising — and in Mexico and Peru, many still prefer to stash away bank notes in cupboards and under mattresses, suggesting that confidence in the financial system remains low.
The LC survey suggests Argentines are most likely to keep their savings in cash, although fewer did so than in the first quarter of 2014. Strikingly, 23 per cent of the 1,000 Colombians who took part in the survey hoarded cash, up from 17.3 per cent in first quarter of 2014.
And perhaps not surprisingly in view of the economic slowdown last year and growing pressures on family budgets, Latin Americans seem to be making less use of their credit cards. Across the region, 41.9 per cent of respondents to the LC survey said they did not have a credit card, up from 41 per cent in the first quarter of 2014. The decline in card usage was steepest in Argentina, Brazil and Chile.