> Posted by Jeffrey Riecke, Communications Specialist, CFI
Last week the President of Mexico launched the country’s long-delayed National Financial Inclusion Strategy. The comprehensive plan engages the spheres of private banking, social welfare, public education, telecommunications, and more to extend quality financial services to the 56 percent of adults in the country who remain without a formal bank account. Although the plan was nearly full-formed three years ago and has since sat on the proverbial shelf, the enactment of the strategy represents a reaffirmed commitment to financial inclusion across the Mexican Government, including the Office of the President, the Central Bank, the Ministry of Finance, and the Ministry of Public Education.
The national strategy is structured as a six-pillared plan. The Ministry of Public Education (Secretaria de Educacion Publica) will promote financial education starting with children and youth by incorporating related content into the curriculum of public education. Financial education will also be embedded in government programs like Prospera, Credito Joven, and Mujeres PYME. Prospera is Mexico’s conditional cash transfer program, which has 6.5 million beneficiaries. Credito Joven is a youth inclusion program introduced in February 2015 that aims to empower young people, in part by providing credit to those with no credit histories. Mujeres PYME offers finance and business development support to small businesses led by women.
The strategy will harness technological innovation in areas including digital payments, mobile phones, and mass data analysis. Recent fintech progress in the country offers a strong foundation on which to build. In 2010 the Mexican government began efforts to digitize social transfers previously made in cash. In 2013 the government launched its national digital strategy, “Mexico Digital”, to further support the country’s transition to a digital economy. Today half of Prospera program recipients receive their payments in digital accounts facilitated by the program. Between 2013 and 2015, the number of digital transactions conducted through the Government’s Treasury Single Account increased from 69 million to 116 million. The Better Than Cash Alliance estimates that the Government of Mexico saves roughly $1.3 billion per year through digitized payments that were previously made in cash. Moody’s Analytics found that between 2011 and 2015, the use of digital payments boosted Mexico’s GDP by around $8 billion. Following the launch of the national strategy last week, Mexico bolstered the switch to digital finance for citizens, businesses, and the government by joining The Better Than Cash Alliance.
Out of Mexico’s population of 120 million, 107 million have a mobile phone and 68 million of these are smartphones. This represents a 24 percent increase in smartphones over just the past 15 months. However, there’s still a long way to go for mobile money – only 9.5 percent of those with bank accounts in the country have mobile banking services associated with them. The Central Bank’s inter-bank payments system, SPEI (Sistema de Pagos Electronicos Interbancarios), has evolved to accept the payments of non-bank providers, like those offering mobile money, facilitating an interoperable mobile money platform that could mature into a comprehensive digital finance ecosystem. Speaking on the newly launched financial inclusion strategy, Luis Videgaray Caso, the Secretary of Finance, asserted that telecommunications reform is generating the most important foundational changes for the Mexican financial system.
Along with telecommunications infrastructure, the strategy prioritizes the development of financial infrastructure in underserved areas. The strategy emphasizes building partnerships between financial players, such as retail chains, to extend banking services to more dispersed locations. In its review of the national strategy, Fitch Ratings highlighted the importance of agent banking models; however, the deployment of agents is still at a relatively early stage. In September of 2015, there were 2.8 correspondents in Mexico per every 10,000 adults, compared to 1.9 bank branches per every 10,000 adults.
The fourth pillar of the national strategy is increased access and use of formal financial services for the underserved and excluded populations. During the launch event for the strategy, President Enrique Pena Nieto noted that through government programs his administration has been able to include nearly 7 million women in the formal financial system. Along with the Credito Joven and Mujeres PYME programs targeting youth and women, there is also a new program providing credit for small farmers. So far, 270,000 farmers have received credit products from the program, and 85 percent of these individuals lacked prior credit histories. Credit access for SMEs is also a big priority for the country, as they make up 71 percent of employment in the country and 51 percent of revenue from the business sector, but only 11 percent of the country’s banks’ total loan portfolio.
The strategy emphasizes the importance of client protection – promoting safer services, responsible institutions, and clarity on the rules and conditions surrounding the provision of financial products and services. This section of the national plan focuses on strengthening CONDUSEF, the government agency concerned with the treatment of financial clients.
Finally, the sixth pillar of the national strategy is the generation of data and measurements to assess financial inclusion. In any effort, it is critically important to conduct periodic evaluations and use up-to-date data. The national strategy seeks to continue efforts like the country’s National Survey of Financial Inclusion. The week prior to the release of the national strategy the second National Survey of Financial Inclusion was announced.
Undoubtedly Mexico’s new National Financial Inclusion Strategy is ambitious. After all, its ultimate aim is for all Mexicans to gain access to the formal financial system. At the strategy’s launch event, Queen Maxima of the Netherlands, speaking in her role as special advisor to the U.N. Secretary General, stated that successful implementation of the plan will require careful planning and coordinated action across public and private groups. But if the strategy is realized, the benefits would be massive. Achieving full financial access in Mexico would bring 67 million individuals into the formal banking system.
Image credit: Accion
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