LAC leaders: DFS, closer cooperation key to COVID-19 recovery

Digital financial services are playing a crucial role in responding to the financial and economic impacts of the COVID-19 pandemic, central bankers from Latin American and Caribbean (LAC) said during a virtual leaders’ dialogue on the role of financial inclusion policies in crisis response on 27 July.

Building on AFI’s existing mechanisms for regional initiatives, such as the Financial Inclusion Initiative for Latin America and the Caribbean (FILAC), the virtual dialogue series was organized as a high-level regional consultation for input from all the geographies represented in AFI. While recognizing that although COVID-19 crisis is a global challenge, regulatory responses should take into account distinct regional impacts and priorities.

AFI Executive Director Dr. Alfred Hannig opened the meeting by underlining that AFI had initiated a COVID-19 Policy Response to provide support for members in designing and implementing high-impact financial inclusion policy interventions.

“Through the COVID-19 Policy Response framework and the in-country implementation program, AFI is committed to delivering systematic and effectively coordinated policy responses to help our members mitigate the effects of COVID-19 on financial inclusion policy implementation in the short-term, and plan systematically for the recovery from the pandemic in the longer term,” AFI’s Dr. Hannig said at the high-level meeting.

In delivering its COVID-19 Policy Response, AFI is also leveraging current partnerships, including funding and private sectors partners, but also reaching out to new partners, to ensure the availability of sufficient financial and technical resources to support AFI members.

“Recovery from the pandemic should be an occasion to transform the development model of Latin America and the Caribbean while strengthening financial inclusion to maintain the stability and health of the economy as well as the well-being of the population,” Dr. Hannig explained, adding that the pandemic has not affected all equally. He reiterated that women, small and medium-sized enterprises, youth, migrants, forcibly displaced and other disadvantaged populations had been more impacted.

Presenting AFI’s COVID-19 Policy Response, AFI Deputy Executive Director Norbert Mumba highlighted digital financial services (DFS) as providing necessary policy interventions, and that AFI’s work with members will focus on consumer protection and financial literacy.

“Vulnerable groups such as women, youth, and FDPs need to be included in whatever policy interventions we make,” said AFI’s Mumba.

While leveraging on DFS, the region intensified its work on policies that have helped strengthen consumer protection and financial literacy, especially for the most vulnerable groups, such as SMEs, women and youth.

LAC’s leading financial sector regulators, central banks, superintendencias and commissions, shared their latest policies, experiences and strategic outlook in addressing the financial inclusion challenges during the COVID-19 pandemic and ensuring that no one is left behind.

Some of the immediate responses included monetary policy interventions, adjusting policies and regulation, providing of stimulus packages, adjusting loan provisioning and moratoriums as well as ensuring the continued flow of credit to the real economy and small businesses.

“Haiti has implemented digital payments to support SMEs to mitigate the impacts of COVID-19 crisis and we look to AFI for support in implementing more solutions in the area of financial technologies (FinTech),” emphasized Governor of Banque de la République d’Haïti (BRH) Jean Baden Dubois, adding that support in FinTech regulation is important for both financial inclusion and for managing the future.

Echoing his statement were Dr. Margarita Hernández, superintendenta of Superintendencia de la Economía Popular y Solidaria de Ecuador (SEPS), and Otto Boris Rodríguez, vice president of Banco Central de Reserva de El Salvador (BCR), who highlighted DFS as a chance to reach the most vulnerable.

“We would like to take this crisis as an opportunity and use tools to support most vulnerable populations,” said Superintendenta Dr. Hernández, adding that SEPS had developed a strategy to focus on “supervision and control, as well as regulatory reforms, necessary to help organizations overcome the crisis from March 2020 to December 2021”.

BCR Vice President Rodríguez explained that this was the time for prioritizing access to credit for SMEs and accelerating DFS. “These are the tools we can now offer to reach our objectives,” he said while highlighting the existing expertise in AFI.

“There is a lot of knowledge in AFI and we must make an effort to take all these models and learnings that AFI has and bring it to all countries that need them,” BCR’s Rodríguez said at the meeting.

A regional leader in DFS has been Paraguay, where regulations on electronic money have been modified to help create 1.1 million more electronic wallets (e-wallets) since the beginning of the pandemic.

“We now have 2.7 million e-wallets for a population of 7 million,” emphasized Fernando Filártiga, a board member at Banco Central de Paraguay.

Financial regulators from 13 AFI member institutions in LAC underlined their continual need for exchange and peer learning in the region as they intensify work on these policies.

“Peer learning needs to continue. It is bringing value to all us in the AFI network, especially now during the crisis. We need to keep on learning to help our economies,” BRH Governor Dubois told AFI LAC leaders during the high-level meeting.

Leaders’ deliberations are expected to steer peer guidance on practical interventions that may be adapted in the network to sustain the gains of financial inclusion. At the same time, AFI leaders will use this opportunity to specify areas for assistance as part of AFI’s in-country implementation support. Designed to help mitigates the impact of the COVID-19 crisis, AFI management unit is using leaders’ virtual dialogues to compile a tailored list of in-country support activities based on specific and individual member needs and national policy frameworks.

Leaders’ virtual dialogues aim to broaden the network’s knowledge base by facilitating AFI leaders with policy response options that further reinforce in-country efforts to mitigate COVID-19 impacts on financial inclusion. The high-level gathering of LAC leaders was the second meeting of the series, after a virtual dialogue was held for the Africa region on 2 July.

Member institutions taking part in the LAC Leaders Virtual Dialogue included El Salvador’s BCR, Banco Central del Paraguay, Haiti’s BRH, Centrale Bank van Suriname, Comisión Nacional Bancaria y de Valores, Comisión Nacional de Bancos y Seguros de Hondurasv, Ecuador’s SEPS, Superintendencia de Banca, Seguros y AFP del Perú and Superintendencia General de Entidades Financieras de Costa Rica.