Banks to tap remittances, microfinance to grow

Wednesday, November 23, 2005

Latin American banks will eventually channel remittances into small business loans and financial products, thus boosting the use of banking services in the region, officials said at the opening of the Latin American Federation of Banks (Felaban) conference in Miami on Monday.

The region received nearly US$41bn in remittances in 2004 and that figure is expected to surpass US$55bn this year, but only 10% will be channeled through the financial system, Inter-American Development Bank (IDB) president Luis Alberto Moreno said at the conference’s opening speech on Monday.

“This represents a huge opportunity for banks to enter a new market, which is attractive both in terms of volume and profitability,” Felaban chairman Juan Antonio Ni?o told reporters.

Some 16 million people from Latin America and the Caribbean who live outside the region send money to their families on a daily basis.

Banking penetration in Latin America is still low, with loans representing only 50% of the region’s GDP, Andean Development Corporation (CAF) executive president Enrique Garc?a said.

While microfinance services have evolved rapidly in recent years, hitting US$4bn in 2004, nine out of 10 micro enterprises in the region have never taken out a loan, Moreno said.

“Microfinance is the fastest growing, most stable market for Latin American banks,” MIF manager Donald Terry said. “It is a huge untapped market and there is money to be made.”

Ni?o also said Felaban would issue two surveys in 1H06 to find out how many banks in the region have taken steps towards implementing the new Basel II capital adequacy rules as well the level of participation in the US government’s Buddy Banks initiative aimed at sharing anti-money laundering practices between US and Latin American banks.

Felaban’s members include national banking associations and other organizations in 19 countries in Latin America and the Caribbean.

Some 2,000 executives from over 600 banks are attending the Felaban conference, which is scheduled to end on Tuesday, November 22.

(Via MicroCapital blog)

Source: Business News Americas (link opens in a new window)