Publication: Financial Exclusion in Latin America - Or the Social Costs of Not Banking the Urban Poor
Abstract
This paper summarizes the findings of research in Bogota, Colombia and Mexico City on the use of financial services by the urban population. The focus is on the majority of persons who have no relation whatever with a formal bank, cooperative or credit union. The paper identifies the characteristics of those who are "unbanked" and the range of reasons for their exclusion. It also discusses the multiple and considerable costs that this exclusion imposes on the unbanked population, as well as the loss in income that results for formal sector financial institutions. The paper concludes by describing some measures taken to extend financial services to the low-income population, and proposes the importance of linking "financial inclusion" to programmes of urban development and upgrading focused on the poor in developing countries.
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Publication From Financial Exclusion to Inclusion : Increasing the Availability of Credit to the Urban Poor in Latin America(World Bank, Washington, DC, 2006-11)This is the second of two articles that draw on the results of recent studies of the links between financial services and low income communities in Latin America. While the focus remains on the nature and inherent costs of financial exclusion for the unbanked -- those without basic deposit and transaction accounts, this article focuses on access to credit and on some of the efforts that have been made to increase the availability of credit services to the urban poor. It closes by describing ways in which World Bank projects could support increased private sector lending for community development, including housing, home improvement, and basic physical and social infrastructure as well as micro and small business lending.Publication Financial Exclusion : A New Angle to Urban Poverty in Latin America(World Bank, Washington, DC, 2005-09)Data gathered during studies conducted over the past four years in Mexico City, Mexico (Distrito Federal); Bogota, Colombia, and in several Brazilian cities suggests that in these countries somewhere between 65 and 85 percent of households are "unbanked", those who do not hold any kind of deposit or transaction account in any formal sector financial institution. This note addresses what can be done to bring banking to the unbanked - and vice versa using five cases from the region: 1) the Nicaragua Broad Based Access to Finance Project focuses on increasing the number of points of service to remote and unattended communities; 2) the Colombia Business Productivity and Efficiency Development Policy Loan also emphasizes increased service points through regulatory reform; 3) in Mexico, the National Savings and Financial Services Bank (BANSEFI for its acronym in Spanish) projects help to promote new service providers with state of the art technology and regulatory services; and 4) Brazil's government has developed alternative service payment systems and regulations to encourage access to savings.Publication Measurement and Meaning : Combining Quantitative and Qualitative Methods for the Analysis of Poverty and Social Exclusion in Latin America(Washington, DC: World Bank, 2001-12)This report consists of a collection of case studies from Latin America combining qualitative and quantitative research methods for the analysis of poverty within a social exclusion framework. The first chapter provides an overview of the differences between quantitative and qualitative methods, and the gains from using both types of methods in applied work. The other chapters are devoted to three case studies on reproductive health in rural Argentina, the targeting of social programs in Chile, and social exclusion in urban Uruguay. Each case study was prepared within the broader context of country-specific economic and sectoral work at the World Bank.Publication The Urban Poor in Latin America(Washington, DC: World Bank, 2005)With three quarters of its population living in cities, Latin America is now essentially an urban region. Higher urbanization is usually associated with a number of positives, such as higher income, greater access to services, and lower poverty incidence, and, Latin America is no exception. Today, urban poverty incidence, at 28 percent, is half that of in rural areas; extreme poverty, at 12 percent, is a third. Despite this relatively low poverty incidence, the absolute number of poor people is high, and most studies agree that about half of Latin America's poor live in urban areas. The Bank's own estimates suggest that 60 percent of the poor (113 million people) and half the extreme poor (46 million individuals) live in urban areas. The report reviews what is specifically urban about poor people living in cities, which reveals a number of facts, critical to understanding the challenges facing the urban poor, and the means to address these challenges. Three preconceived ideas are discussed, that tend to cloud judgment about urban poverty. All three spring from the common misperception that urban statistics are representative of the urban poor. However, the relatively low incidence of poverty in cities, combined with Latin America's high inequality, imply urban statistics are almost never representative of the urban poor. Concerning the differences between urban and rural poor, the need for differentiated strategies to tackle urban as opposed to rural poverty is implied, and, the first and most important differential is the greater integration of the urban poor into the market economy. Second, while urban areas are not systematically unequal than rural areas - it depends on the country, and, within countries, on the city - they are much more heterogeneous socio-economically, or with respect to economic activities and processes. Third, heterogeneity notwithstanding, Latin American cities tend to be highly segregated. As a result, social exclusion coexists with (relative) physical proximity to wealth, services and opportunities. This gives rise to negative externalities, or neighborhood effects that result in a lower ability to access jobs, lower earnings, and lower educational achievements. Fourth, social networks are less stable in urban areas, with relationships based more on the quality of reciprocal links between individuals and friends, than on familial obligations. Fifth, urban living also means much greater exposure to organized crime, drugs and gang violence. This is true for the population as a whole, but it has particularly dismal implications for the poor living in the slums of Latin America's large cities, where drug-traffic is now pervasive. Finally, another important characteristic of urban poverty has to do with overwhelmed, rather than absent services. The underlying hypothesis of this report is that, indeed, the causes of poverty, the nature of deprivation, and the policy levers to fight poverty are, to a large extent, site specific.Publication Latin America & the Caribbean - Urban Services Delivery and the Poor : The Case of Three Central American Cities (Vol. 1 of 2) : Service Delivery and Poverty(Washington, DC, 2002-06-03)The present study describes, and quantifies the provision of basic urban services to the poor, in three Central American cities in El Salvador, Honduras, and, Panama. It also identifies priority areas for government intervention, using specialized household surveys to quantify current deficits, and to rank households from poor to rich, using aggregate consumption as the measure of welfare. The urban poverty profile is examined in each city, through migration, growth, and mobility patterns, including education and labor characteristics. In terms of land and housing, in all three cities, almost half of the poor who reported being property owners have weak, or no documentation over their properties, and, considerable portions of the poor population, are not connected to the public aqueduct, while few if any, receive help from the government. High dependency on public transportation was reported, e.g., one hundred percent in El Salvador, ninety seven percent in Tegucigalpa. Institutional, and policy issues explain the current situation: in terms of decentralization, municipalities have limited functions vis-a-vis the delivery of basic services; as for the housing sector, there is a vast gap between housing provision, and housing finance; and, particularly for water, and sanitation, the institutional framework for the delivery of basic services, is characterized by great uncertainty. Strikingly, public transportation is entirely provided by the private sector, but the lack of regulation, causes problems reflected in an overall low quality of service.
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