Last week MicroVest’s Head of Latin America Investments, Armando Simón spoke at the Latin American Impact Investing Forum’s (FLII) 2022 Convergencia to discuss practical applications of financial inclusion in the region and shared ideas on how to face a challenging global scenario where financial inclusion and gender-lens investing are an increasingly necessary tools for development.
Financial inclusion is one of the major objectives and challenges for economies around the world, given that it is key to reducing poverty and inequality and stimulating economic growth. In Latin America, 70% of people have historically been either unbanked or under-banked, and cash remains the dominant form of payment. However, the region is starting to make progress thanks to changes in regulation in select countries and technological innovation. Both Brazil and Mexico have implemented legal frameworks to license digital innovators. Fintechs can often lower the cost of distributing various financial services and make use of new sources of data to understand risks in activities like lending. Large incumbents are also being pressured to launch their own tech-enabled financial solutions to remain competitive.
Digital finance has progressed significantly from the days of pure microlending and philanthropy. Today, financial institutions must promote inclusion through more than simply opening a transaction account. Financial instruments like savings and insurance products should also aim to achieve higher penetration rates to truly close financial inclusion gaps. While the opportunity is significant, impact investors can focus on having a clear theory of change to track how financial institutions are impacting their borrowers. Investors can also look to add value beyond their capital, which could take the form of technical assistance or helping institutions target certain problems like climate change or the gender gap in access to finance.
MicroVest is excited about the opportunities for fintechs, banks and other financial institutions to collaborate further with regulators and incumbents to take financial inclusion to the next level, to help close the gender gap, and build trust in the financial system in Latin America.
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