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At the IDB, we believe that together we can go farther. Our partnership network is making positive differences in Latin America and the Caribbean every day, and this blog is our channel for telling that story. Stay tuned for literature on partnership perspectives, stories from the field, changing trends, outlooks for development and the region, information on ways and opportunities to partner, and more. Thanks for stopping by.
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Financial Services at Your Fingertips, Yet out of Another’s Grasp

By - Oct 29 2015

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Whether it’s swiping a debit or credit card for an afternoon coffee, handling a utility bill with a quick online transfer, or paying off a mortgage at the end of the month, it’s likely we are unaware of just how often we use financial services on the day-to-day. With mobile payments ever-more accessible and innovative payment applications popping up left and right, financing today—more than ever before—is found right at our fingertips. Yet while you or I may access our bank statement with the tap of a button or complete our grocery shopping from a mobile device, for many this is far from reality. According to a report by the Consultative Group to Assist the Poor (CGAP), only 39.2% of adults (age 15+) in Latin America have an account at a formal financial institution. The rest remain financially excluded, lacking access to the basic financial services may of us have come to view as mere conveniences.

And though financial inclusion is no easy hurdle to overcome, the emergence of microfinance has done much to alleviate this burden and promote access to banking for thousands of people in the region. Initially emerging in Bangladesh in the 1970s, Latin America is now home to one of the world’s most robust microfinance industries. Acknowledging its effectiveness early on, regional countries like Bolivia were quick to follow Bangladesh’s footsteps, becoming an early and prominent hub for the development of this social and economic innovation, which had an early focus on microcredit.

Since its early beginnings, microfinance has met the needs of individuals with limited resources, those traditionally excluded from the financial sector due to perceived high risk profiles and reduced profitability. Innovation has only expanded the impact of microfinance, allowing for the design of products and services that promote financial inclusion. These can come in the form of funding (more standardized and simple products), savings products (which help users save money in a safe and methodical way), payment services (which allow for the sending and receiving of remittances), and insurance products (including micro-insurance to protect users in the areas of health, accidents, and agriculture-related risks).

Recognizing its potential early into its emergence, the Inter-American Development Bank (IDB) joined the microfinance industry early, positioning itself as a pioneer in promoting microfinance in the region. In the last two decades, the Multilateral Investment Fund (MIF) of the IDB Group has promoted the expansion of leading microfinance networks and encouraged many innovations that further spark this industry’s growth. Thanks to these efforts and those made by governments and the private sector, the region is now home to more than 1,000 microfinance institutions, boasting a microcredit portfolio of nearly US$37 billion in loans to serve some 20 million customers.

For an example of the IDB’s work in this space, look no further than the Inter-American Forum on Microenterprise (FOROMIC). It is a space where companies and financial institutions—particularly those working with microfinance, micro, small and medium enterprises—can present on how their innovations support financial inclusion. This year’s edition took place in Santiago de Chile from October 26-28 with the objective of addressing such issues as innovations and new technologies for SME financing, big data, impact investing, crowdfunding, new digital platforms, new frontiers for financial inclusion and savings, and more. With so many individuals living daily without the access to finance you and I take for granted, I encourage you to learn more about the microfinance sector through video coverage of the event. Don’t miss the brightest minds and most inventive innovators in the microfinance space.

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