IDB President Says Digital Finance Can Boost Regional Economies

President of the Inter-American Development Bank (IDB) Group, Luis Alberto Moreno, says digital finance has the potential to significantly boost the economies of countries throughout the region.

Citing a report by the McKinsey Global Institute, he said the widespread adoption of digital finance could boost the gross domestic product (GDP) of all emerging economies by $3.7 trillion per year over the next decade.

“That’s equivalent to adding the GDP of Germany to the global economy every year,” he said.

Mr. Moreno was addressing the 19th staging of the Forum for Markets Innovation and Capital (FOROMIC) at the Montego Bay Convention Centre in Rose Hall, St. James, on October 24.

Digital finance enables individuals and companies to access payments, savings, and credit products through use of a smartphone or other communication technology device.

Mr. Moreno noted that approximately two billion people and 200 million businesses, globally, lack access to formal credit and savings mechanisms.

“Given the right tools and products, millions upon millions of unbanked people could finally gain access to formal financial services, unlocking all kinds of productivity gains,” he pointed out.
He pointed to the potential impact of expanding access to digital finance, noting that the vast majority of adults now have access to a mobile telephone with Internet service.

Noting the growth potential of companies involved in digital finance, Mr. Moreno cited the example of Chinese-based Company Ant Financial Services, which in just over three years has grown to 450 million users, aiming at young consumers of modest means, becoming the most valuable fintech company in the world.

He noted that the company handles millions of mobile and online payments per day. “They now offer money market savings products, micro loans, micro insurance, and credit scoring services.” he said.

Mr. Moreno explained that digital finance has the best chance of taking root in countries with a robust digital infrastructure, a dynamic financial services market, and where people are open to new ways of banking.

He said that there is room for growth in the sector, since fewer than half of the households in the region have bank accounts and only about 16 per cent of those families use them to accumulate savings. He, however, cautioned that there must be improvements in digital infrastructure and mobile broadband connection.

“About half of the region’s population has access to a mobile broadband connection, but services are much slower and much more expensive than in other parts of the world and we have huge disparities. Some of our cities have Internet service as fast and reliable as Manhattan, while many of our rural areas are as poorly served as Madagascar,” the IDB President said.

Spearheaded and organised by the Inter-American Development Bank (IDB) through its Multilateral Investment Fund (MIF), FOROMIC 2016 is being staged from October 24 to 26 at the Montego Bay Convention Centre under the theme ‘Creating Opportunities through Financial Inclusion’.