This is not exactly the perfect moment for banks to take on new risks. In such a volatile economic climate as today’s, the seemingly prudent thing would be to do very little. But, in a new World Bank report, Financial Development in Latin America and the Caribbean: The Road Ahead, we argue that the time is right for the financial sector in Latin America and the Caribbean (LAC) to expand sustainably in new directions, to boost economic activity and financial inclusion.
LAC has demonstrated a strong financial footing, having weathered the global crisis of 2008-2009 better than most. After a history of recurring instability, the region’s strengthening of macroeconomic and financial oversight policies helped prevent toxic loans and U.S.-style bubbles. In fact, during the 1980s and 90s, the financial sector was the region’s Achilles heel. Ever since, the financial systems have grown and deepened, becoming more integrated and competitive, with new actors, markets, and instruments flourishing. Now that the successes of LAC’s macro-financial stability are widely recognized and tested, we believe it is the right time to move forward with a broader agenda.
But greater financial stability and resilience has not translated into increased financial services, as compared to the world. Even when savings have accumulated and funds are available for investment.