The Provision of Banking Services in Latin America: Obstacles and Recommendations

This paper identifies problems for the provision of financial services by banks in Latin America and offers possible solutions. The paper states that:

• The depth of and access to financial systems are crucial for development;
• In Latin America, banks are the most important providers of financial services to both individuals and firms;
• However, the level of bank credit to the private sector are extremely low compared to those reached in industrial countries;
• Obstacles to the provision of banking services encompass a wide variety of economic and social factors, in addition to those related to the financial system.

The paper categorizes theses obstacles into the following four categories:

• Socio-economic obstacles that undercut the demand for financial services;
• Problems in the operation of the banking sector;
• Institutional deficiencies, such as the quality of the legal framework and the govern ability of the countries in the region;
• Regulations that distort the provision of banking services.

The recommendations that the paper makes to confront these obstacles take into consideration the political constraints facing individual countries. Some of them include:

• Public-private partnerships to improve financial literacy;
• The creation of juries specialized in commercial activities to support the rights of borrowers and creditors;
• The approval of regulation to allow widespread usage of technological innovations to permit low-income families and small firms to gain access to financial services.