One of the central concerns in Latin America an the Caribbean (LAC) has been the reduction of poverty and inequality so prevalent in the continent. Using large world samples, the literature has found that financial development increases economic growth, increases the income of the poor, and reduces inequality. This paper studies the effects of financial development on the whole distribution of income in LAC. We find that the income of the poorest quintile has not been affected by expansion in the financial system. However, we do find that financial development has had a disproportionate positive effect on the incomes of the second, third and fourth quintiles. We also find some evidence for the Greenwood-Jovanovic (1991) hypothesis that this positive effect only begins after a country crosses a certain economic development threshold.
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Mexican Government’s Banks offer loan guarantees to private banks in order to spur credit directed to non-financial small and medium sized firms and this policy is examined here. Application of representative data to the comparative static analysis of the guarantee-use decision suggests that these schemes, as currently designed, are justifiable from an economic viewpoint. However, there is some evidence of inefficiency and ineffectiveness about the way these guarantee programs operate. Marginal take-up is plausibly explained only by the benefits perceived by private bankers.
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This article presents the Mexican experience with the introduction of basic transaction accounts. Basic accounts are relatively cheap simple banking products with restricted functionality targeted at social groups that have limited access to transaction accounts. In Mexico, basic payroll accounts and accounts for the general public were introduced. By law, these products must be offered by all institutions engaged in receiving deposits and withdrawals, and balance inquiry and account opening fees may not be charged. This article analyzes the potential impact of the introduction of these products by estimating the access frontier using MxFLS data. It has been estimated that there are approximately 10 million potential basic account holders. For basic payroll accounts, it has been estimated that over 5 million individuals could benefit. Finally, this article presents lessons from international cases as well as from the Mexican experience with the introduction of basic accounts, which could be useful to other countries.
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In March 2004, BANSEFI and SAGARPA began a project to examine the impact on households of the Program to Strengthen the Popular Credit and Savings Sector (Programa de Fortalecimiento del Sector de Ahorro y Crédito Popular), which was designed to help non-bank financial intermediaries to abide by the Ley de Ahorro y Crédito Popular (LACP), passed by the Mexican Congress in 2001. During the spring of 2004, 5,768 households were surveyed. The survey was repeated each of the next three years. Attrition over the survey period was substantial, but in 2007, 3,723 of the households surveyed in 2004 were interviewed for the last time. This report analyzes the household survey data in an attempt to shed light on the impact of the Program. The principal findings of the report are… (see full document).
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