Why the Government and the Private Sector Must Work Together to Expand Access to Digital Financial Services in Guatemala

John Dorrett, Digital Finance Team, USAID
This article was originally published on www.marketlinks.org
July 5th, 2023
Area Covered:
Latin America
Financial Inclusion • Women’s Financial Inclusion • Micro, Small and Medium Enterprises (MSMEs) • Financial Regulation • Crisis Response • Resilience Building • Research

Countries in Latin America and the Caribbean are revolutionizing access to banking services and empowering millions of previously unbanked individuals. According to the latest data from the World Bank Findex, 73 percent of people in the region (excluding high-income countries) own a financial account—and the proliferation of digital financial services and financial technology (fintech) played an essential role in this growth. A recent study by the Inter-American Development bank asserts that the size of the fintech industry in Latin America and the Caribbean more than doubled in size in the past three years. According to the same report, the COVID-19 pandemic led to the rapid integration of digital technology across all sectors, including the increased adoption of digital payments platforms.


While the expansion of digital financial services has increased access to financial products, the benefits have not been universal. The World Bank Findex finds that financial inclusion in Guatemala lags behind its neighbors with only 37 percent of the population having an active financial account versus 49 percent in Mexico and 48 percent in Belize. Likewise, Guatemala has not seen a parallel growth in digital financial services; 65 percent of people in the region have made or received a digital payment, while only 26 percent of people have done the same in Guatemala. A recent USAID blog explores how digital finance can deepen financial access and usage among underserved communities in Guatemala. There are two contributing factors to this phenomenon: (1) financial service providers, which include traditional banks, do not see low-income and marginalized populations as bankable, and (2) low-income and marginalized populations, especially women, who do not think financial service providers address their needs or create products with them in mind.


In February 2023, USAID, ConsumerCentriX, and Digital Frontiers, a USAID program run by DAI, co-hosted a workshop to identify gaps and opportunities in the access and use of digital financial services by low-income and marginalized populations, with a particular focus on women. The event brought together more than 50 representatives from the financial sector, including both public and private institutions. As a signal of local government buy-in, a senior representative from the Ministry of Economy opened the event, which also featured a breadth of representatives from regulatory bodies, development organizations, financial services providers, NGOs, and mobile network operators.


The workshop included a review of the latest financial inclusion and digital financial services advancements in Guatemala, an assessment of the enabling environment for further digital financial inclusion, and highlights from customer market research conducted to understand the financial lives and opportunities to offer digital financial services to vulnerable populations. The workshop enabled representatives from the public and private sector to work together to design a digital financial product based on market research findings. Attendees were enthusiastic about this and took into consideration the various elements needed to make a product or service a success—everything from regulation to marketing to the solution itself. This type of partnership is essential for holistic product design and market understanding because it incorporates all facets of the market for a common outcome and fosters deeper collaboration between key sectors of the industry. The benefits of increased collaboration to build inclusive digital financial services in Guatemala are manifold.


This starts with ensuring that everyone is able to easily obtain formal identification, which is managed by the government and typically required for opening a bank account or an online financial services account. According to a 2018 World Bank ID4D survey, 26 percent of the Guatemalan population aged 18+ do not have an identity card. It is up to the public sector to alleviate this simple barrier for access to financial services and products for many Guatemalans.


Second, the public and private sectors can help to increase financial literacy and awareness among the population. Many Guatemalans are still unfamiliar with the array of digital financial services available to them—from mobile money apps to accessing their online bank account—and may be understandably hesitant to adopt them. It is important that financial services be offered in Spanish and the 24 various indigenous languages to correct misconceptions. Government agencies and financial service providers can work together to develop educational campaigns and outreach programs that increase awareness and build trust.


Finally, collaboration between the public and private sectors can help to drive innovation. The private sector is better positioned to move quickly to respond to the unique needs of the Guatemalan market. This can include building new payment systems, digital lending platforms, and other services that increase access to financial services for everyone.


Collaboration between the public and private sectors in financial services can also be mutually beneficial. Increasing access to digital financial services in Guatemala will bring it in line with regional neighbors and enable financial service providers access to left-behind segments of the Guatemalan population. Ultimately, this work removes barriers to entry into the financial system, increases financial literacy, and drives innovation which serves Guatemalans.


Photo Credit: USAID By John Dorrett, Digital Finance Team, USAID

AFI Special Report • Blog: In times of crisis, Financial Inclusion with a focus on Women is not a distraction but actually a force- multiplier

Benedikt Wahler, Partner
June 16th, 2023
Area Covered:
Financial Inclusion • Women’s Financial Inclusion • Micro, Small and Medium Enterprises (MSMEs) • Financial Regulation • Crisis Response • Resilience Building • Research

In times of crisis, Financial Inclusion with a focus on Women is not a distraction but actually a force- multiplier – as highlighted by a new Special Report of the Alliance for Financial Inclusion (AFI) prepared by CCX. The COVID-19 pandemic has not just been a call to action but also a hotbed of innovation, testing and learning.

A new Special Report published by AFI, analyses the global set of experiences of financial sector policymakers, regulators and financial institutions, and provides recommendations: financial inclusion policy, particularly with a focus on Gender Inclusive Finance (GIF) leads to more effective policy response when a crisis is on as well as faster recovery and better resilience to future crises. In other words: a focus on women is the way to Build Back Better in the financial sector.

Gaps between women and men in the access to and usage of formal financial services, such as bank accounts, credit facilities, and insurance remain large and in a few regions were even growing. Before the COVID-19 pandemic, Gender Inclusive Finance (GIF), therefore, was a policy priority in many emerging markets. Already in 2016, the members of the Alliance for Finance Inclusion – central banks and financial regulatory institutions from 76 developing countries –  committed to halving these gender gaps in the Denarau Action Plan. But a fast-moving crisis that disrupted social and economic life might seem to suggest such priorities have to wait.

With deep-dive research, extensive stakeholder interviews, a survey of one-third of AFI members and the financial inclusion policy and solution design expertise of our team, ConsumerCentriX (CCX) supported AFI to explore the nexus of women’s financial inclusion and crisis response in the project “Closing the Financial Inclusion Gender Gap During the Crisis and Afterward”.

The evidence from pioneering AFI member experiences is clear and borne out in macroeconomic data and numbers of active users of financial services. Without a focus on women as the largest group of at-risk, under-served citizens, crises linger, recovery is slower and less stable, and countries can catch a case of “economic long-COVID”.

AFI members like Paraguay, Fiji, Egypt, Bangladesh, Zimbabwe, Togo, Ghana, and Rwanda show that even under the pressures of crisis, Gender Inclusive Finance should be in focus. It helps set the right priorities, mobilise the most impactful set of stakeholders, identify the key operational challenges, and target beneficiaries with a large multiplier effect. Enabled by the opportunities of digital finance that can be ramped up fast even for poor countries that had so far seen limited adoption, GIF gets crisis relief and stimulus to where it is needed most and makes sure economic life can continue.

Some of the key recommendations for policymakers and financial services providers include:

Policymakers (central banks, regulators, supervisors)

  • Support the development and use of digital financial services as an enabler and crisis-proofing of financial sector operations. Benchmarked against women’s needs and constraints, it will deliver the widest adoption – especially in areas likely the hardest to reach in times of crisis. For example, one of Africa’s poorer and smaller economies, Togo was able to launch payments to informal workers – many of them women -within 14 days and ramp it up to 1 in 5 adults.
  • Make sure that new users who signed up during the crisis remain active users of formal (digital) financial services – and don’t revert to cash or informal practices. Women as financial managers of the household are key. Incentives, financial literacy, and consumer protection can help entrench these new practices of using financial services. What counts most are reliable, lost-cost everyday use cases: sending money to family and friends, paying for groceries – enable such ecosystems so that money that arrives from government support remains cashless.

Financial services providers (banks, MFIs, Fintechs, insurance companies)

  • Building cashflow-based and digitally-enabled lending solutions ahead of a crisis makes the short-term liquidity support easier to deploy when crises hit. Women, as consistently better re-payers even in times of a global pandemic, are loyal clients, and as the financial managers of their households, they should be at the center of efforts to create these lending solutions. Using human-centred design that focuses on their needs and constraints is the approach to get it right.
  • Partner with other organizations to promote financial inclusion for women, such as NGOs, government agencies, or business development skills providers where possible to enhance your reach among women. This can be done through providing non-financial services, such as business development training tailored to the needs of women entrepreneurs.
  • Actively engage regulators in financial inclusion working groups to help shape Gender Inclusive Finance and be able to draw on established lines of communication and collaboration when crisis hits. This will lead to pragmatic and impactful policies.

In addition to the 5 case studies that are already published, ConsumerCentriX and the Alliance for Financial Inclusion will soon also share a policy toolkit to operationalize the recommendations from the special report. Stay tuned for more updates.

To access the report, visit:  “Closing the Financial Inclusion Gender Gap During the Crisis and Afterwards” project special report.