Access to Financial Services in Colombia: The "Unbanked" in Bogota

This report provides an overview of the state of financial access in Colombia. It discusses:

• The decline in access to financial services in Colombia;
• The decrease in the number of current and savings accounts per inhabitant;
• The lack of incentives for private banks to increase their level of intermediation and provide services to low-income clients;
• The challenge of increasing intermediation to the poor.

The paper finds that:

• Colombia's banks provide costly services mainly catered toward high-income clients;
• Financial exclusion is associated with lower education;
• The unbanked save and borrow largely in the informal sector;
• Home ownership rate is high, showing that the unbanked have the capacity to build assets and are therefore bankable;
• Location plays a role in financial exclusion;
• Financial exclusion creates welfare losses for the economy.

For improved access to financial services, the paper recommends:

• Regulatory incentives, supply and demand side initiatives;
• "Smart subsidies" to bridge the higher transaction costs associated with the low-income segment;
• The use of low-cost technology;
• Simple product solutions;
• The development of growth and income generating policies;
• Financial education;
• Governmental measures to increase demand for low-cost electronic banking services;
• Building a better financial infrastructure.