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FINLAC: A New Initiative on Financial Inclusion to Boost Economic Recovery and Transform Lives

October 26, 2021 by Daniel Fonseca - Terence Gallagher - Eric Parrado - Vitoria Moraes - Sergio Navajas - Diego Vera-Cossio Leave a Comment


The COVID-19 pandemic has battered Latin American and Caribbean economies. Due to its large informal sectors, weak health systems, and fiscal restrictions, the region’s economy has been hit harder than any other declining by 7% last year—the largest GDP contraction since 1821. But unlike previous crises, where problems originated or were exacerbated in the financial sector, financial markets have been part of the solution, a phenomenon greatly enhanced by the acceleration of digitalization and financial inclusion over the last year and a half.

Fintechs (financial technology firms), banks, cooperatives, and other financial institutions, rising to the challenge, made a large effort to reach unbanked citizens. Policymakers provided the necessary infrastructure and policies to bring millions of unbanked citizens into the banking system and quickly deploy resources to vulnerable businesses. Huge amounts of aid were distributed through digital platforms. In April, to cite one example, the Colombian government expanded cash transfer payments to over 3 million households, 70% of which were previously unbanked.

As the region faces the immense challenges of economic recovery, the need to accelerate these efforts at digitalization and financial inclusion and build back better could not be greater. That is why the IDB has launched a financial inclusion hub, known as FINLAC, to promote greater knowledge sharing of up-to-date market data, effective policy experiments, successful investment transactions, effective technical assistance projects, innovative business models, and dynamic partnerships. The idea is to make financial inclusion a key part of economic transformation, treating it not as part of a niche market, but rather as a natural extension and characteristic of a modern financial system.

Such efforts at greater digitalization and financial inclusion will be crucial to bringing the more than 200 million citizens in the region who lack access to financial services into the modern economy. They could also help deliver capital to micro and small-scale businesses, which generate much of the employment in the region, and allow them to benefit from integration into local, regional, and global value chains through access to electronic payments infrastructure. In this way, the digital transformation and financial inclusion of small and medium-sized enterprises (SMEs) and the economic empowerment of traditionally excluded or underserved groups—a key pillar of IDB Group’s Vision 2025—will help reform and invigorate the region’s battered economies.

The IDB Group has nurtured financial inclusion throughout its 62-year history. It is now at a pivotal moment. The economic recovery is creating a demand for much greater financial resources. New digital technologies are showing tremendous potential to transform the financial sector and quickly scale up outreach, and consumers are increasingly embracing digitalization in their daily lives. Moreover, both the private banking sector and governments have demonstrated that they are eager to embrace the new technologies and bring underserved groups into the financial system.     

FINLAC will advance these causes at first by trying to ensure that financial inclusion is a top priority for the region’s financial systems and that there is progress in the use of digital payments and growing digital innovation throughout the region’s economies. But there are many ideas to explore. Everyone is invited to participate with ideas, comments and suggestions.

Latin America and the Caribbean face one of the most critical moments in its history after the immense economic contraction and disruption wrought by the COVID-19 pandemic. The future of an entire generation is at stake. We are happy to present FINLAC with the conviction that greater knowledge around digitalization and financial inclusion can help rectify the region’s currently grave situation and contribute to relief for some of its most vulnerable people.


Filed Under: Microeconomics and competitiveness, Social Issues Tagged With: #Financial Inclusion, #FINLAC

Daniel Fonseca

Daniel Fonseca has worked for the Inter-American Development Bank for over fifteen years -currently as Senior Financial Operations Specialist in the Connectivity, Markets and Finance Division- leading operations with governments and development banks in Latin America and the Caribbean and developing financial solutions to promote greater mobilization of private investment in the region. He has also worked in the IDB's Financial Markets Division, preparing operations with private sector banks and capital market structures. Prior to joining the IDB, he worked for over ten years in financial markets in Costa Rica, focusing on credit, investment banking, strategy, and finance. He holds a degree in Banking and Finance from the International University of the Americas.

Terence Gallagher

Terence Gallagher is a British national, based in Washington. He began his career as an investment banker at Citigroup, where he spent 9 years supporting emerging market governments and corporates access the international capital markets, working from London, New York, and São Paulo. Since 1999, he has dedicated himself to Financial Inclusion, initially working as a consultant for diverse organizations such as Accion International, Development Alternatives Incorporated, and PlaNet Finance. He joined the IFC in 2008 in Rio de Janeiro where he spent 10 years as a Specialist for Micro and Small Enterprise Finance, responsible for investments in Latin America and Sub-Saharan Africa. As of April 2018, Terence moved to Washington to join IDB Invest as head of Financial Inclusion. He has a master’s degree in Economics from the University of Cambridge, UK.

Eric Parrado

Eric Parrado Herrera is Chief Economist and General Manager of the IDB’s Research Department since March 2019. Before joining the IDB, he was a professor of economics and finance at the ESE Business School of the Universidad de los Andes in Santiago, Chile. Mr. Parrado is a visiting professor at Oxford University and the Central European University, and a member of the World Economic Forum's Global Future Council on Financial and Monetary Systems. Throughout his professional career, Mr. Parrado has focused on monetary, fiscal and financial policy, advising central banks on managing inflation targeting regimes and implementing sovereign wealth funds in several countries. He has also written several academic articles on monetary policy, fiscal policy and sovereign wealth funds.

Vitoria Moraes

Vitória Moraes is a Brazilian national based in Washington, D.C. She has more than five years of work experience in regulatory and policy research, institutional relations, and partnership building, both in Brazil and the United States. Since March 2018, Vitória has been working for the Resource Mobilization Division of the IDB Office of Outreach and Partnerships. Within the Office, she manages the institutional relationship with different stakeholders, including both private and public sector institutions, such as foundations, UN agencies, financial intermediary funds, and corporations. She is also the main focal point for all partnerships, outreach campaigns, and resource mobilization activities related to the IDB Social Sector. She has a master’s degree in Public Relations and Corporate Communications from Georgetown University.

Sergio Navajas

Sergio Navajas is a senior specialist at the IDB Lab. He has worked for the IDB Group for more than fifteen years, mainly on financial inclusion issues. He has been a senior economist at USAID, a researcher at The Ohio State University, and a loan officer at Banco Bisa de Bolivia. Sergio graduated with a bachelor's degree in Economics from the National University of Tucumán and a master's degree in Economics from The Ohio State University, from which he also obtained his PhD in Development and Finance.

Diego Vera-Cossio

Diego Vera-Cossio is an economist in the Research Department of the Inter-American Development Bank. His area of interest is development economics. In particular, his research analyzes how different policies help or prevent family businesses from growing in contexts in which access to finance is limited. He is also interested in understanding how different methods of targeting and delivering resources from public programs affect policy effectiveness. Diego, a citizen of Bolivia, received his Ph.D. in Economics from the University of California, San Diego in 2018. He holds a Master’s Degree in Economics from Universidad de Chile and a Bachelor’s Degree in Economics from Universidad Católica Boliviana.

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