Latin America not capitalizing on potential of remittances

Latin America has been unable to capitalize on the spectacular growth in remittances to the region, which last year rose to a total of almost $70 billion, because most of these funds end up in the informal economy, said Fernando Pozo, president of the Latin American Federation of Banks (FELABAN), whose 41st Annual Assembly will be held in Miami from Nov. 4-6.

“Unfortunately we’re regrettably wasting the great potential of the remittances. The problem is that it’s still a small number of people who receive and send remittances through the banks, (and thus people are) not capitalizing on the advantages of saving, credit, investment and financial advisory services that they offer. This situation is one of the factors that stems Latin America’s growth,” Pozo said.

The executive said that, according to a study on bank usage in Latin America, which will be presented during the assembly, the great challenge for banks is finding the mechanisms so that the $68.05 billion in remittances that arrive in the region can be channeled to promote saving and productive investment like micro-enterprises.

“It’s important that banks are more incorporated into the process of sending money, which will allow the cost of the transfers to be reduced, benefiting the sender, the recipient and also the financial system,” Pozo said, adding that banks are increasingly being used to send remittances.

According to Manuel Orozco, executive director of the Inter-American Dialogue’s rural development and remittances project, over the past three years the percentage of Mexican immigrants using the banking system to send remittances from the United States has grown from two to six percent.
Pozo said that insofar as these figures increase, there is a greater “financial culture” and more people are drawn into the banking system, Latin America will have greater possibilities for growth.
According to Pozo, bank usage rates in Latin America are very low relative to industrialized nations and this will be a main theme of FELABAN’s upcoming assembly, during which a report will be presented titled “Promoting Access to Financial Services: What the Figures on Bank Usage in Latin America Tell Us,” prepared by economist Liliana Rojas, president of the Latin American Shadow Financial Regulatory Committee.

About Felaban:

The Latin American Banking Federation (FELABAN), represents more than 600 banking and financial institutions in 19 countries. It was established in 1965 in the city of Mar de Plata, and is a non-profit organization.

About FIBA:

FIBA is a non-profit organization founded in 1979. FIBA serves as the umbrella organization for international banks and other entities in Florida engaged in international banking and financial activities. FIBA has over 140 members, including more than 70 banks and financial institutions from 19 countries.

FIBA promotes the growth of international banking and finance and has engaged in advocacy on behalf of its membership at the state and national levels. FIBA also provides its members with a multitude of other services ranging from education and professional training programs to civic activities to strategic affiliations with other international and national banking organizations.