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What the Future Holds for Financial Inclusion in Argentina

By | [email protected] | July 13, 2018 4:07pm

Argentina national flag against low angle view of skyscrapers at sunsetArgentina national flag against low angle view of skyscrapers at sunset (Photo via International Banker)

In Argentina, half of the population does not have a bank account. Brutal but true, and Mauricio Macri has made one of his top priorities to change this reality, along with the Ministry of Finance and the Central Bank, to broaden access to financial inclusion.

The latest project was led by one of the most famous banks in the world, Santander, which plans to open branches in Argentina’s villas (shanty towns), where the population rarely has access to formal financial institutions. Around 6,000 people stand to benefit from this new initiative which will include, despite some safety concerns, ATMs.

According to Santander, the aim is to open five different branches in 2018; the first one has just been inaugurated in La Mantanza, the most populous district of the Buenos Aires province. The five others are slated to be in the Carlos Gardel, 31, 20, and Papa Francisco villas.

“This project brings liberty,” one resident said to El Cronista, since a bank account isn’t required, he explains, though it’s a possibility. Other banks are now interested in participating in the initiative, according to media reports.

Santander is trying to bring financial inclusion into Argentine slums (Photo via El Cronista)

The issue is still the same for Macri’s administration; Argentines have had a complicated relationship with banks since the 2001 crisis. The fear of losing their money is still very much present among the general population. However, a curious fact about the nation’s banking culture. Globally, 72 percent of the men have a bank account, compared to only 65 percent of women; in only six countries is it the other way around, according to the BBC. Georgia, Indonesia, Mongolia, the Philippines, Laos and… Argentina, where 51 percent of women have a bank account, compared to 46 percent of men.

The number could be explained by the many social assistance programs provided by the government, many of which are dedicated to women, such as the Asignación Universal por Hijo, which requires a bank account to access the money. The problem is, people often use the account only to receive and withdraw the government funds, without incorporating it further. As such, it doesn’t really make an impact on the goal of financial inclusion.

This is the challenge the Central Bank is working to address, which is why its tried to attract fintech companies recently, as there is a huge possibility for them to develop innovative ways of banking.

For example, Santander has not only opened new branches in the villas, but is also looking at opening digital banks via their Openbank app, to a new population of younger clients. Argentina has more smartphones then bank accounts, so there is a real possibility for growth in this sector, and the number of people financially included in the banking world should rise thanks to this.

Initiatives like Openbank or Ualà, which are on the rise, also allows this younger clientele to avoid the misery of queueing at the bank for hours on end. For example, Ualà’s founder, Pierpaolo Barbieri, told The Bubble in April about the importance of financial inclusion in the country: “Only when you’re into this system can you think of entrepreneurship and taking risks. We can’t just let these people operate in cash, because it is not safe and they are being damaged by inflation.”

For each payments, the users receive a notification via the app (Photo via Ualá)

Other companies, like Transfer Wise, even went to the Central Bank to work with them on new policies to change the legislation, as they are “on the same journey, with the same goal of including a bigger part of the population in the financial system,” Diana Avila, head of Banking in Latin America, told us. They want to see financial inclusion happen, through new apps, websites, and companies that are not a part of the more institutional side of banking.

Finally, the fintech world has recently seen the arrival of the blockchain technology, and Argentina’s Central Bank has not waited for long before pushing initiatives in this sector, and seems to be willing to use it as soon as possible. Recently, MIT organized a congress on the “Fintech Revolution” and blockchain technology in Buenos Aires, which provided information to Argentine investors on financial inclusion opportunities permitted via blockchain technologies; the Vice Pesident of the Central Bank was present.

Moreover, on August 1st, the first-ever Blockchain World Congress will take place in Buenos Aires, with investors and industry professionals. Talks and meetings about crypto-currency, digital banking, and the technology itself are on the agenda which could shape the future of banking in Argentina, one where the population has bank accounts to be able to receive funds, avoid walking around with thousands of pesos in their pockets, and be better protected from hyperinflation.