New Data and Momentum for Financial Inclusion in Paraguay

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Paraguay’ s progress towards developing a National Financial Inclusion Strategy received a boost of energy and analytical rigor last week, as the Central Bank released new demand-side data describing the current state of financial inclusion for the country’s 4.8 million adults.

According to the EIF (Encuesta de Inclusion Financiera) data, 29 percent of adults in Paraguay have an account at a formal financial institution, 28 percent of adults use a mobile money product, and 55 percent use some type of financial service (including both of the former but also credit, insurance, and other payment products). This puts Paraguay below the average for account penetration in Latin America (39 percent as of 2011), but suggests that the country is a regional leader in the expansion of mobile financial services.

The EIF was conceived of last fall when the Paraguayan authorities, eager to paint a comprehensive and up-to-date picture of financial inclusion in their country, expanded the Global Findex questionnaire to cover additional topics including financial capability, insurance, and domestic remittances. Efforts were also made to align the EIF questionnaire with the unique financial-sector landscape in Paraguay, which features a strong cooperative sector and a fast-growing mobile financial service industry led by mobile network operators (MNOs) Tigo and Personal.

The resulting EIF data, collected in late 2013 in partnership with the World Bank and Gallup Inc., represents a valuable update and extension of the 2011 Global Findex.

On June 4, the data and related analysis were presented to the public by Santiago Peña, board member of the Central Bank of Paraguay, in an event that included key stakeholders such as the Minister of Finance, the President of the Cooperatives regulator (INCOOP), the World Bank Resident Representative, and representatives from the public and private sector as well as a wide range of civil society actors.

The data and event – described in detail the next day on the front page of a national newspaper – also served to renew momentum toward the development of the National Financial Inclusion Strategy. The authorities plan to use the EIF data to define targets, identify priority populations, and develop policy actions. The data will also act as a baseline from which to measure progress and as a means to hold the government accountable for its financial inclusion commitments.

It is clear from the data that non-bank actors like cooperatives and mobile money operators play a critical role in expanding the reach of financial services in Paraguay. Twenty-eight percent of adults report using a mobile money product, compared to 21 percent who have either an account or a loan with a cooperative, and 15 percent who have either an account or a loan with a bank. But it is equally evident that the major actors – banks, cooperatives, and mobile money operators – have a lot to learn from each other if real progress is to be made in expanding the availability and quality of financial services.

Banks, for their part, are being outpaced and out-innovated by the non-bank actors in reaching segments of the population where there is a clear demand for financial services. The cooperative sector, while impressive in its reach, faces serious challenges related to stability and consumer protection: For example, there is currently no deposit insurance in the sector, although that may soon change.

And while MNOs have very quickly captured a large segment of the market (including 23 percent of unbanked adults), many of these users rely on over-the-counter money-transfer products (as opposed to personal wallets). So it remains to be seen whether these companies can offer their clients access to a more complete range of financial services that include savings, credit and insurance.

The data suggests that unbanked adults in Paraguay are constrained in their use of basic financial services by a lack of money, a lack of documentation, excessive bureaucracy, and high costs associated with accounts. The National Financial Inclusion Strategy will need to address these barriers to access – but recent developments, including the launch of basic saving accounts at major commercial banks and a new electronic money law, may already be shifting the calculus for unbanked adults who want reliable and easily-accessible financial services.

Within the next few months, the demand-side analysis will be complemented by a supply-side analysis, a legal and regulatory analysis, and a consumer protection and financial literacy diagnostic. Together, they will provide a robust analytical underpinning for the National Financial Inclusion Strategy’s development and implementation.

In recognition of the fact that financial inclusion is an important enabler for realizing the World Bank’s twin goals of eliminating extreme poverty and boosting shared prosperity, the Bank’s Latin America and the Caribbean Financial and Private Sector Development team, the Financial Inclusion and Consumer Protection team, and the FIRST initiative will continue to support and work closely with the Paraguayan authorities on these analyses, as well as with the National Financial Inclusion Strategy itself. Once released, the strategy will mark a new and ambitious chapter in Paraguay’s efforts to expand financial inclusion.




Douglas Randall

Senior Financial Sector Specialist

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