COVID-19 impacts every one of us, transforming economies, healthcare and education. Our communities are forever changed, and it’s up to world leaders, organizations, governments and businesses to act quickly to help mitigate the negative impacts of this crisis and urgently attend to the needs of the most marginalized and affected communities.

As an organization that provides financial, health and education services to underserved women in Latin America, Pro Mujer is adapting. Our health and financial teams across the region are quickly developing new ways to meet the needs of our beneficiaries, while building short- and long-term strategies to ensure women continue to receive support, so they can stay healthy and address the economic impact of stay-at-home policies.

We are already seeing how inequalities become exacerbated as health and economic resources become strained. Projections are showing that poverty and unemployment will continue to increase as many businesses shut down. In Latin America, <a href="https://www.cepal.org/en/pressreleases/covid-19-will-have-grave-effects-global-economy-and-will-impact-countries-latin">unemployment could rise by 10 percentage points</a>, and we could see <a href="https://dialogochino.net/en/trade-investment/34547-coronavirus-takes-toll-on-latin-american-economies/">poverty expand</a> from 35 million to 220 million people.
<h2>Marcela’s Story</h2>
Marcela Castrillo is one of millions of women in the region who are being significantly impacted by this pandemic. As an owner of a small handicrafts manufacturer in Argentina, Marcela depends largely on sales to tourists who pass by public markets, fairs, and train stations. With the suspension of travel and a nationwide stay-at-home order in Argentina, she has lost her income.

Marcela, like so many other Pro Mujer women, are concerned as they struggle to find financial support from the government or elsewhere. Since 2008, Pro Mujer has provided Marcela with microloans to help her keep and grow her business. She and her family have also had access to basic health care at Pro Mujer’s clinics, including pediatric care for her children and gynecological care for her teen daughters.

“We understand that our health comes first. Without health, you can’t do anything. But it is really hard when you have to tell yourself that if you do not go out to work, you will not have food to put on the table. And if you go out, you could get really sick,” Marcela said. This is a recurring concern among low-income individuals across the region.

In cases like Marcela’s, our financial team is building short and long-term strategies to make sure our beneficiaries can provide for their families and do not lose their businesses. We are delaying as many loan payments as possible and reassessing our clients’ financial needs individually, a labor intensive but worthwhile process. Once mandatory lockdowns are over, our beneficiaries will also need capital to restart their businesses. Pro Mujer will be there to support them.
<h2>Accelerating a Digital Transformation</h2>
COVID-19 has had a direct impact on how we engage with our clients and patients. While Pro Mujer has been undergoing a process of digital transformation, the crisis has accelerated projects that allow us to serve our beneficiaries digitally. In Nicaragua, for example, we have ramped up our efforts to promote our digital wallet to facilitate payments among our financial services clients and to strengthen our financial support during the crisis.
<blockquote>We have ramped up our efforts to promote our digital wallet to facilitate payments.</blockquote>
Our health workers are using WhatsApp to connect with patients and provide virtual counseling sessions to answer any questions women might have about the virus or their overall health. We have already seen the spread of false information that preys on people’s levels of stress and anxiety, and we are seeing a disturbing upward trend in domestic violence and femicides during this time. This is why we have prepared our <a href="https://www.youtube.com/watch?v=f8YGfXk10SU">health staff</a> on how to provide relevant information to help our beneficiaries and their families cope with this pandemic, both physically and emotionally.

We are also putting additional resources into digitizing educational materials and fast-tracking initiatives – including trainings for our entrepreneurs on how to market and sell on Facebook – and digitizing material on health and wellbeing to engage our community through video and interactive content. Despite the fact that some of our clients – and a <a href="https://es.weforum.org/agenda/2019/03/cuantas-personas-usuarias-de-internet-hay-en-america-latina/">huge portion</a> of the Latin American population – do not have access to the internet, we are seeing a clear willingness among our clients and patients to adopt digital channels to stay connected.
<h2>A Time for Learning, Creative Solutions and Dignity</h2>
When Bolivia went on lockdown, Benigna Quisbert, a 73-year-old Pro Mujer client, had to close down her clothing shop. Like Marcela, she was left with no income. Worried about how she was going to provide for her grandchildren and about the health crisis in her community, Benigna decided to use her skills to produce face masks. She was able to secure a contract with a public hospital in El Alto, the city where she lives, to make these masks for health workers.

All of us are learning how to navigate an entirely new environment. At Pro Mujer, we are taking this moment to act quickly and at the same time reflect on what has worked for us and what needs to change so that we can build a more resilient organization that can quickly adapt to women’s changing needs.

Today, more than ever, we are seeing the critical need to build systems and structures that guarantee human rights, including equal access to fundamental resources – like health care, education, and food – and systems that allow for gender equality.

Pro Mujer’s team understands this is also a great opportunity for organizations to look at different ways of thinking and doing, to explore new horizons and prioritize the delivery of services for underserved communities around the world, and to ensure they live with dignity.

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The Pandemic Will Not Deter Us

Argentina

Latin America and The Caribbean

Bolivia

Test of a Lifetime: COVID-19 and Financial Inclusion

Challenges and Crises

Enabling Environment

Blog Post

Sofia  Huizar

Camila  Montañez

Liliana Rojas

Lucia Pacheco

Somen Saha

Brazil

Chile

Uruguay

Honduras

Financial Technology

Policy, Regulation and Government Initiatives

Agent Banking

Digital Financial Services

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<img class="alignright wp-image-24986" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/thumb_08961175df7c4694bc95b207ebf9a116.jpg" alt="" width="330" height="220" />

<em>The following post was <a href="https://www.cgdev.org/blog/assessing-quality-regulations-improving-financial-inclusion-eight-latin-american-countries">originally published</a> on the Center for Global Development's blog and has been republished with permission.</em>

The most recent <a href="http://www.worldbank.org/en/programs/globalfindex">World Bank</a> data on financial inclusion shows that by 2014, only 54 percent of the adult population in Latin America had an account at a financial institution. This compares to an average of 62 percent of adults worldwide and 70.5 percent for those countries with a similar level of income per capita (the region’s peers). In developed economies, 94 percent of adults have an account at a financial institution.

Many factors could be cited for the low ratios of financial inclusion in Latin America, but in a recent <a href="https://www.bbvaresearch.com/wp-content/uploads/2017/09/Regulatory-Practices-for-Financial-Inclusion-in-Latin-America-vf_mod.pdf">paper</a> published at BBVA Research, that also came as a CGD <a href="https://www.cgdev.org/sites/default/files/index-regulatory-practices-financial-inclusion-latin-america_0.pdf">working paper</a>, we focus on the potential role of financial regulation. We assessed and compared the quality of the policies and regulations that impinge on financial inclusion in eight Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico, Paraguay, Peru, and Uruguay). Peru and Mexico came out on top, with what appear to be the best regulatory frameworks for promoting financial inclusion. But even in these top performers, there is room for improvement.


<h3>Identifying regulatory influences on financial inclusion</h3>
In our recent study, we identified three dimensions of regulatory practices and policies that can influence financial inclusion:
<ol>
 	<li><em>Enablers</em>: regulatory practices that determine the overall quality of the financial environment where providers of financial services operate</li>
 	<li><em>Promoters</em>: regulations that deal with specific types of market frictions and describe the rules of the game for the provision of specific financial products and services for low-income populations</li>
 	<li><em>Preventers</em>: regulations that, often unintentionally, create obstacles for expanding the supply and demand for financial products and services</li>
</ol>
In total, we identified 11 regulatory practices across these three dimensions. The assessment of these policies relies on the construction of three indices of regulatory quality (one for each dimension), and 11 sub-indices (for the 11 regulatory practices that form these dimensions). Additionally, we constructed a non-regulatory sub-index for assessing governments’ efforts to promote financial literacy.

<img class="aligncenter wp-image-24980" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/table-cgd.png" alt="" width="616" height="237" />

To form each of the sub-indices, we assessed a number of variables selected on the basis of internationally accepted standards and a vast review of the existing literature. For each variable, we assigned scores in a range from 0 to 2 (where 2 represents the highest level of quality for the variable). For obvious reasons, it is not possible to go into the specifics of each variable and each sub-index here (the detailed explanation can be found in the <a href="https://www.bbvaresearch.com/en/publicaciones/an-index-of-regulatory-practices-for-financial-inclusion-in-latin-america/">study</a>). However, there are two novelties about the construction of the sub-indices that are worth highlighting.

First, in constructing the sub-indices, we recognize that there may be interactions between variables that affect their whole impact on inclusion. Let’s take, for example, the sub-indices of simplified accounts or electronic money. Should regulatory constraints on fees and commissions charged by financial institutions to their customers for owing or using these products be assessed as detrimental or favorable for financial inclusion? The answer, as reflected in our index, is “it depends.” Setting no restrictions on fees and commissions to open and manage simplified or e-money accounts is desirable <em>if</em> the quality of competition policies for the financial sector is satisfactory. In other words, the recommendation to let financial institutions determine fees freely depends on the ability to prevent the emergence of monopoly powers through robust competition policies. In terms of our index, this means that to assess the quality of some <em>Promoter </em>components (simplified accounts and electronic money) we need to recognize their interaction with an <em>Enabler</em> component (competition policies).

A second interesting feature is that the index incorporates an interaction between some of the regulatory practices and other forms of government intervention that can increase the potential of those regulations. Continuing with the example of simplified accounts and electronic money, in the study we considered that the regulation governing the provision of these products is of a better quality if the government promotes their usage by individuals and small companies through additional efforts (such as depositing government transfers to low-income populations in these accounts) than if it stays aside. Finally, the amplifying effect of policies to enhance financial literacy on regulatory practices classified as Promoters is another example of the interactions between regulations and governmental interventions.
<h3>Which countries have the best regulatory frameworks for financial inclusion in Latin America?</h3>
The map below summarizes the results of our index of regulatory practices for financial inclusion in eight Latin American countries. The numbers represent the values of the overall index and of each of the three sub-indices (each ranging from 0 to 2, as mentioned above).

[caption id="attachment_24978" align="aligncenter" width="615"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/rojas-suarez-pacheco-regulatory-figure1.png"><img class="wp-image-24978" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/rojas-suarez-pacheco-regulatory-figure1.png" alt="" width="615" /></a> (click to enlarge)[/caption]

As shown, all the countries have strengths and weaknesses in their regulatory frameworks. Peru appears to have the best regulatory framework, followed closely by Mexico. Obviously, some areas of Peruvian regulation could be enhanced, but in broad terms, the regulatory framework is robust and conducive to financial inclusion. Mexico, on the other hand, has more room to improve the quality of its regulatory framework, especially the regulations classified as Promoters. Still, the country might soon solve some of the deficiencies we identified in our study (for instance, the absence of a dedicated regulatory framework for electronic money). In fact, Mexico’s Congress is currently discussing a draft law that seeks to leverage the possibilities of financial technology (or fintech) to advance financial inclusion.

At the opposite end of the spectrum, Argentina and Brazil have the lowest scores. Both present very low scores along the Preventers dimension as there are various elements in their regulatory framework (from financial transaction taxes to directed lending by the state) that might run counter to financial inclusion objectives. Thus, in these countries major changes to the regulatory framework are needed to achieve sustainable progress in financial inclusion.

The rest of the countries obtain modest results that also tend to be explained by very low scores in the Preventers index but more solid results in the Enablers and Promoters indices. The case of Colombia stands out in this last group: although the country is strong in the Promoters index, the existence of a financial transaction tax, the imposition of ceilings on interest rates, and directed lending practices generate multiple distortions and explain why Colombia’s overall score lags behind Peru and Mexico.
<h3>Does regulatory quality alone explain the financial inclusion gap?</h3>
The answer to this question is “no.” As discussed in the CGD report <a href="https://www.cgdev.org/sites/default/files/CGD-financial-regulation-task-force-report-2016.pdf">Financial Regulations for Improving Financial Inclusion</a>, regulation is important for two main reasons: first, because the right regulatory framework is key to enable the private sector to adopt innovations in digital finance and encourage their use by low-income populations, and second, because policies to increase financial inclusion must be compatible with the traditional objectives of financial regulators. Thus, they should not undermine the stability and integrity of the financial system, while ensuring effective consumer protection.

It should not be a surprise, though, that regulation is not the only factor that determines a country’s success in advancing inclusion. Many other factors matter, including socioeconomic constraints, the macroeconomic environment, institutional quality, and specific characteristics of the financial system. In other words, having an enabling regulatory framework is a necessary but not sufficient condition for sustainable progress in financial inclusion. This is the conclusion of an econometric study in <a href="http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=40368033">Rojas-Suarez (2016)</a> that shows that in Latin America, institutional factors matter most in explaining the financial inclusion gap.

That said, an appropriate regulatory framework is essential for financial inclusion. Thus, by signaling areas of strength and weakness in the regulatory practices of individual countries, the <a href="https://www.bbvaresearch.com/en/publicaciones/an-index-of-regulatory-practices-for-financial-inclusion-in-latin-america/">index of regulatory practices for financial inclusion</a> is meant to support the efforts of policymakers in the region with a mandate to improve financial inclusion. Therefore, beyond the specific country scores, what is truly useful from this index is the opportunity it provides in motivating discussion among market participants, policymakers, and interested researchers, as it already has at the <a href="http://www.lacea.org/portal/index.php?option=com_content&amp;view=featured&amp;Itemid=101">Latin American and Caribbean Economic Association</a> meeting in Buenos Aires last November. Hopefully, these types of conversations will serve to guide regulatory reforms.

<em>Liliana Rojas-Suarez is a senior fellow at the Center for Global Development.</em>

<em>Lucía Pacheco is an economist at BBVA Research.</em>

<em>Image credit: Accion</em>

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Assessing the Quality of Regulations for Improving Financial Inclusion in Eight Latin American Countries

10 Ways to Organize for Digital Innovation in Financial Services

<em>&gt; Posted by Verónica Trujillo Tejada, Consultant, MIF/ Inter-American Development Bank</em>

Building up a regulatory framework for the development of a microfinance market is a complex task. It requires taking into account a broad variety of topics as well as country specific needs and features. There are some internationally-applicable recommendations for the design of microfinance regulatory frameworks (<a href="http://www.cgap.org/publications/guide-regulation-and-supervision-microfinance">CGAP 2012</a>, <a href="http://publications.iadb.org/bitstream/handle/11319/4898/Gu%C3%ADa%20de%20Principios%20para%20una%20Efectiva%20Regulaci%C3%B3n%20y%20Supervisi%C3%B3n%20de%20las%20Operaciones%20de%20Microfinanzas.pdf?sequence=1">ASBA 2010</a>, and <a href="http://www.bis.org/publ/bcbs175.pdf">Basel 2010</a>) but little is known about how different countries have implemented their guidelines or what the effects are of these rules in each market.

In the recently released paper “<a href="http://www.degruyter.com/view/j/bejeap.2014.14.issue-4/bejeap-2013-0145/bejeap-2013-0145.xml">Microfinance Regulation and Market Development in Latin America</a>,” published by the <em>B.E. Journal of Economic Analysis &amp; Policy</em>,<em> </em>we analyze the relationship between microfinance regulatory frameworks in 17 Latin American countries and the corresponding markets’ levels of development.

One way to characterize microfinance regulations is as either <strong><em>general</em> </strong>or <strong><em>specific</em></strong> rules. The general rules are devoted to regulating typical financial system issues, while the specific rules target microfinance products or institutions. Two other regulation classifications are <strong><em>protection</em></strong> rules and <strong><em>promotion</em></strong> rules. Protection rules have the goal of preserving financial system stability or protecting the financial consumer, and promotion rules aim to favor the development of microfinance services or institutions by softening the restrictiveness of the overall regulatory framework.

We find a wide variety of regulatory designs in the Latin American region. Countries such as Chile and Uruguay, for example, stand out for their lack of microfinance specific rules; though their employment of general and protection rules give their regulatory frameworks a base upon which they could build microfinance specific regulation. Other countries such as Honduras, Brazil, and Argentina have included specific or promotion rules in their regulatory frameworks, however either their level of implementation of general and protection rules is below the average of the countries examined in the report, or their frameworks have addressed microcredit but not through the specific criteria the report analyzes.

The analysis between microfinance regulatory frameworks and the level of development of the corresponding markets - which incorporated the size of the microcredit portfolio, number of clients, operative and financial efficiency of institutions, among other variables - enabled us to draw the following conclusions:
<ol>
	<li>All four types of regulation rules – general, specific, protection, and promotion – are significantly and positively correlated with bigger microfinance markets.</li>
	<li>Rules specific for microfinance are related to better MFI financial and operational performance, and better market data.</li>
	<li>Both general and protection rules are significantly and positively correlated with better developed microfinance markets - specifically in terms of profitability, operational efficiency, and portfolio quality.</li>
	<li>The implementation of both specific and promotion rules shows a positive and significant correlation with bigger informal, rural, and microenterprises sectors.</li>
</ol>
So, which would be the elements to consider when designing regulatory frameworks to contribute to the development of a microfinance market?

Of course there is no one formula to apply across countries, as markets and contexts differ. And more analysis (as well as more industry data) is required. However the report indicates that analyzing whether a financial system’s regulation includes ample general and protection rules is crucial for the better development of the microfinance market, preserving stability and the well-being of its clients. Introducing specific rules on microfinance services and institutions, considering the particular features of microfinance activities, could very well support institutional solvency and the employment of adequate risk management procedures. And promotion rules should be considered as a mechanism to favor market development. Regulators must be open to evaluating new actors, technologies, and methodologies for the provision of microfinance services, considering the possibility of granting them individualized treatment - in some cases lowering the usual standards for a short period of time.

To learn more about the analysis and to access the full report, <a href="http://www.degruyter.com/view/j/bejeap.ahead-of-print/bejeap-2013-0145/bejeap-2013-0145.xml?format=INT">click here</a>.

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