mexico financial inclusion

The World Bank reported in its latest Global Findex that in 2014, 51 percent of adults in Latin America have bank accounts compared with only 39 percent in 2011. The challenge of ensuring that the unbanked can have access and make use of financial services is one that requires ongoing work on a global scale.

If efforts at achieving greater financial inclusion are to be successful, then there must be a greater focus at the national level, particularly in countries where levels are the lowest. Increasingly, developing countries are stepping up their efforts to resolve this problem.

Mexico Announces Multifaceted Financial Inclusion Strategy

In Mexico, where only 44 percent of adults currently have accounts, the government has launched a bold initiative that is expected to give a tremendous boost to the level of financial inclusion in the country. Released in June 2016, the National Policy on Financial Inclusion sets out the road map for the Mexican government’s strategy.

There are six key areas in the new policy:

Financial Education
One of the most important components of an effective financial inclusion plan is awareness and education. Mexico’s Ministry of Education will include financial education within the basic education curriculum, and financial training courses will be made widely available to the adult population.

“It is not simply to incorporate users into the financial system, but to have instruments that will be useful and to know also how to use them,” said Mexican President Enrique Peña Nieto.

Leverage Technology
Although more than half of Mexico’s adult population lacks a bank account, a much higher proportion makes use of current technology. Nearly 90 percent of Mexicans have a mobile phone, which opens the door to innovative solutions for financial inclusion such as mobile money and digital payments.

Develop Financial Infrastructure
President Nieto acknowledged that there exist many gaps in terms of Mexico’s present financial infrastructure. The new policy aims to promote partnerships between the government and the private sector to encourage the development of more financial services in underserved areas.

Improve Financial Services Access and Use
The Mexican government is committed to increasing both the levels of access to and use of formal financial services. Already, it has financially included close to 7 million women in poverty through the distribution of a government transfer debit card. Plus more than 6 million households now have life insurance coverage, and previously excluded populations now benefit from business loans at preferential rates.

Protect Financial Services Consumers
As with any system that handles money, consumers that use financial services should be adequately protected through effective regulation and enforcement. By making consumer protection a priority, the government wants to promote safer savings and public trust of financial institutions.

“This strengthening is given from the financial reform, while promoting the protection of personal data to prevent, among other crimes, identity theft,” Nieto commented on the subject.

Financial Inclusion Measurement
There is also, of course, a need to be able to measure and quantify any progress made with Mexico’s financial inclusion initiative. To meet this need, the government plans to continue issuing its regular National Survey for Financial Inclusion and will provide support for academic research projects that will help to determine the policy’s success.

New Policy Benefits Mexican Fintech

The new Mexican policy will have a positive impact that goes beyond building greater financial inclusion among the country’s population. Another announcement made shortly after the policy unveiling bodes well for Mexico’s financial technology (fintech) sector.

Mexico announced in June 2016 that it had joined the United Nations’ Better Than Cash Alliance, a partnership of governments, companies, and international organizations focused on accelerating the transition from cash to digital payments with the goal of reducing poverty and driving inclusive growth. The Latin American nation has already seen impressive gains from its move to digital payments since 2011. Between 2011 and 2015, digital payments boosted Mexico’s gross domestic product (GDP) by nearly $8 billion, and the government is saving roughly $1.3 billion every year through greater efficiency.

The decision to join the Better Than Cash Alliance is a logical next step after launching its national digital strategy in 2013. In just two years, the number of digital payments through Mexico’s treasury account had risen by 40 percent from 69 million in 2013 to 116 million in 2015.

In addition, the World Bank’s private sector arm, IFC, has also been supporting Mexican fintech. IFC has been particularly active in areas including peer-to-peer (P2P) lending, online lending, and payment infrastructure. It has also been involved with helping local microfinance organizations with adopting digital financial services.

President Nieto and his government have created an ambitious plan to improve the economic situation for Mexico and its people. As more of the adult population gains greater financial knowledge and access to accounts, local fintech startups like BillPocket and Credilikeme can only stand to benefit as demand for their services will rise.

What do you see for the future of financial inclusion and fintech in Mexico?