Financial Inclusion: The Good and The Not-So-Good
By Duglas Balbín
Ah, the magic of interest rates! It’s like a thrilling roller coaster ride—except some of us are still standing in line, holding a hot dog and wondering why we’re not getting on. Let’s dive into the world of finance, where excitement is at the limit of a technical jargon—and by excitement, I mean a few percentage points saved on our next big investment (like a stylish new coffee machine).
The Credit Conundrum
So, the Financial Superintendent, César Ferrari, believes we need more access to credit. Now, let’s think about that for a moment. What do we actually mean by financial inclusion? It’s a lovely phrase, isn’t it? Kind of like “fairy-tale ending,” or “silent disco.” Rules apply, but nobody can hear you scream.
“There will be no inclusion if it is little and expensive.” – César Ferrari
Even as some folks are enthusiastic about accessing credit, others find it as elusive as a decent cup of coffee before 10 a.m. Jonathan Malagón from Asobancaria shares this riveting insight: “The first step is getting people into deposit products.” Because what’s more thrilling than a savings account, right? I mean, where’s the edge-of-your-seat drama in terms and conditions?!
The Urban-Rural Divide
And speaking about thrilling divides—oh, buddy—we have to discuss the urban versus rural credit gap! The 2023 Financial Inclusion Report shows that while urbanites might have stellar access to credit like it’s an open bar, rural folks are still trying to find the bathroom. And hey, there’s a gender gap too! It appears that women and men are still having very different experiences in the credit world, which is a situation that’s about as surprising as the last season of a reality show.
When Credit Meets Technology
Lucky for us, fintech is riding in like a knight on a shiny Bitcoin horse! Daniela Martínez of Juancho Te Presta is out to break barriers and offer credit so that startup whizzes can get their hands on capital without waiting for hours in a stuffy bank where the coffee’s as stale as the jokes.
“60% of our beneficiaries are women.” – Daniela Martínez
So why does this matter? Because the youth of today want quick, efficient solutions. They don’t want to pick up their phones and feel like they’re time-traveling back to the ‘80s with all that paperwork. They’d rather stay in their pajamas and swipe for credit like they were on Tinder! Swipe right for a loan, swipe left for regret—now that’s the way to make financial decisions.
The Credit Pact and Other Delights
The Credit Pact sounds like something you might find in a terrible sci-fi movie, but it’s real and it’s happening! And just in time—like a superhero swooping in to save the day—with an additional $55 billion for sectors that clearly need it. Naturally, this sounds great on paper, but isn’t it funny how numbers are always so much easier to say than to see change?
Fintechs vs. Traditional Banking
As inflation rises, access gets cut, leaving the average Joe feeling turned around and confused. But here comes Diego Fernando Martínez, waving the fintech flag and declaring liberation from traditional banking! These nimble little companies are slashing through red tape like a hot knife through butter. But will our dear grandmothers still be trying to understand what “cloud banking” actually is? Absolutely. Bless their hearts.
Wrapping Up: Cheers to Becoming Financial Grown-Ups!
At the end of the day, the energy surrounding financial inclusion is electric, but only if you’re plugged into the right socket. It seems like newcomers to the credit game are finally getting their chance, but let’s keep the conversation alive about fairness, access, and making sure that everyone, from urban dwellers basking in their banking glory to the rural pioneers, knows that credit isn’t just for the bravest among us. It should be the right of every financial adult to apply for a loan without feeling like they just signed over their first-born child!
So here’s to a future where it’s easier for all of us to access credit and maybe—just maybe—balance our budgets without crying into our cereal. Cheers!
By Duglas Balbín
The recent reduction in interest rates has sparked a wave of enthusiasm among individuals and businesses eager to explore, invest in various assets, or utilize funds for working capital. However, despite the improving environment for credit access, many still find it elusive. Experts acknowledge the strides made in promoting financial inclusion, yet they emphasize that much work remains. Financial Superintendent César Ferrari underscored the necessity for the country to enhance access to credit, stating that financial inclusion will not be achievable if credit remains scarce and costly.
Jonathan Malagón, the president of Asobancaria, reiterated that while progress has been made, significant challenges endure. “The journey to financial inclusion for individuals and small-scale productive units must begin with ensuring they have access to deposit products. This foundational step is crucial for integrating them into the financial system,” he asserted. According to the 2023 Financial Inclusion Report from Banca de las Oportunidades, even though there has been growth in the use of financial products, notable gaps remain between urban and rural populations. Disparities also exist between genders. Among the prominent challenges highlighted is the provision of credit for productive projects. María Clara Hoyos, president of Asomicrofinanzas, emphasized addressing these gaps through various mechanisms: implementing a program from the National Guarantee Fund that provides coverage of up to 90% for microcredits, embracing open finance for more extensive information exchange within the financial ecosystem, and employing Artificial Intelligence tools to lower transactional costs.
What do the entities offer?
María del Pilar Correa, Nequi’s Business Strategy leader, noted that the pathway to introducing individuals to credit involves starting with low-amount operations and short-term loans. As an illustration, she referenced the Salvavidas product, which offers amounts ranging from $100,000 to $500,000 for a repayment period of 30 days.
By responsibly managing these smaller obligations, clients can pave the way for greater credit opportunities as their payment history becomes recognizable, leading to pre-approval for larger amounts and terms under products like the Propulsor credit, which can range from $500,000 to $10 million, with repayment terms spanning 36 months.
This year alone, Nequi has granted credits to 277,000 individuals, amounting to an impressive $550 billion pesos. Notably, 28% of these loans have been extended to customers with no prior credit experience, while 46% went to those classified as having low experience. Looking ahead to 2024, 25% of all pre-approved loans will specifically target individuals without credit histories, while 38% will benefit those with limited experience.
Meanwhile, the Crearcop cooperative has partnered with municipalities across the Aburrá Valley, bolstering support for small entrepreneurs. Collaborating with national entities such as Banca de las Oportunidades, Bancoldex, and the National Guarantee Fund, they have directed credit towards the Economy for the People initiative. Manager Carmen Ramírez highlighted ongoing projects with Finagro specifically designed to empower rural microentrepreneurs.
Between 2016 and 2023, this cooperative has facilitated microbusiness endeavors with loans totaling $6,416 million. A remarkable 49% of the disbursements have been through an agreement with Bancoldex under the Bogotá Responde initiative.
Jorge Corrales Montoya, manager of the CFA Financial Cooperative, shared insights on how the portfolio has been tailored to improve the living conditions of various community segments.
Six distinct lines of specialized credit, alongside a comprehensive program offering savings, credit, insurance, and social benefits, have been established to assist diverse groups of individuals and businesses. Remarkably, in just two years, this initiative has provided credit access to 9,814 women, 726 migrants, 50 micro-scale mining entities, 33 indigenous individuals, 6,469 participants from rural backgrounds, and 5,902 entrepreneurs, including 670 seniors over the age of 70.
One innovative purely digital initiative gaining traction is Juancho Te Presta, a fintech company. Daniela Martínez, the customer experience manager, noted that fintechs are dismantling barriers to credit access. Over the past four years, this company has issued 32,000 loans, with a notable emphasis on supporting women: “60% of our beneficiaries are female, with 22% being single mothers. Additionally, 10% of the funds are designated for education, another 10% for initiating businesses, while 49% enhances the quality of life for recipients.”
The Credit Pact is a reality
Asobancaria has announced that the Credit Pact will facilitate additional disbursements totaling $55 billion over 18 months aimed at supporting five strategic sectors. This initiative seeks to extend financial resources to natural persons and businesses with limited access to formal credit. The Pact will allocate $3.7 billion specifically for the Popular Economy, supplementing an existing plan of $700 billion.
Fintechs are a real alternative
Diego Fernando Martínez, a financial behavior trainer, observed, “As inflation rises, intervention rates tend to increase, making savings more appealing while simultaneously constraining credit access for those lacking payment capacity. However, the new opportunities presented by fintechs are emerging as viable alternatives. Many younger individuals, who are averse to traditional banking protocols, long queues, and complex processes, represent a substantial market for these services.”
125,000 agricultural producers received credit for the first time in 2023.
Nequi pre-approved $5.7 billion in loans based on clients’ assessed debt capacity.
“The financial inclusion of people and small-scale productive units begins by ensuring that they have access to deposit products,” Jonathan Malagón, president of Asobancaria, emphasized.
Arriers that have historically limited access to credit, particularly for underrepresented groups. With a focus on simplifying the application process and enhancing user experience, fintech is redefining how people interact with financial products.
As we navigate this thrilling landscape of financial inclusion, it’s vital to acknowledge the strides made in making credit more accessible. However, challenges remain—particularly regarding the intersectionality of urban versus rural access and the wider gender gap. While urban residents often enjoy the benefits of digital banking and easier credit access, those in rural areas face significant hurdles, as highlighted in the 2023 Financial Inclusion Report.
César Ferrari’s advocacy for increased access to credit serves as a reminder that financial inclusion is not just a buzzword but a necessity for a thriving economy. The statement “There will be no inclusion if it is little and expensive” resonates deeply as it emphasizes the importance of affordability and accessibility in credit offerings.
Moreover, the increasing role of fintech companies like Juancho Te Presta and Nequi shows promise in bridging these gaps. With tailored products aimed at facilitating access for young applicants and those with limited credit histories, these companies underline the importance of innovative solutions in achieving broader financial inclusion.
The narrative surrounding credit and finance is transforming, and there’s hope on the horizon. The Credit Pact and the support provided by various cooperatives and banks appear to be paving the way for a more inclusive financial future. It’s essential that as we move forward, we keep the conversation alive—not just about access, but about equity, support for sustainable entrepreneurship, and the importance of a financial system that works for everyone.
Cheers to a brighter financial future, one where everyone has the tools they need to succeed!
