Financial Inclusion in Latin America: Facts and Obstacles
39 Pages Posted: 29 Oct 2016
Date Written: October 20, 2016
This paper shows that, in spite of recent progress in the usage of alternative financial services by adult populations, Latin America’s financial inclusion gaps relative to either high-income countries or the region’s comparators (countries with a similar degree of development) have not reduced generally and, in some cases, have even increased during the period 2011-2014. An econometric investigation of potential country-level obstacles explaining these gaps finds that institutional weaknesses play the most salient role through direct and indirect effects. Lack of enforcement of the rule of law directly reduces depositors’ incentives to entrust their funds to formal financial institutions. Indirectly, low institutional quality reinforces the adverse effects of insufficient bank competition on financial inclusion.
Keywords: financial inclusion, Latin America, financial regulation, institutional quality
JEL Classification: D14, G21, G28
Suggested Citation: Suggested Citation