Children and the Financial Regulatory Landscape: Latin America
Close to 5 percent of the youth population worldwide has access to a savings account, though they represent around 18 percent of the world population, and disparities are significant; in some economies (i.e Australia, France and New Zealand) around 70 percent of students of 15 years old have a bank account, though in others (Israel, Poland and Slovak Republic) the figure is less than 30 percent. In spite of the increasing evidence that has revealed that early access to financial services has long-term impacts, children and adolescents continue to face major obstacles to be financially included.
Access to reliable financial services is a first step towards true financial inclusion that enhances welfare and allows people to reach their economic goals. However, the lack of appropriate regulation, allowing children and youth to open and operate their own financial services as well as the lack of availability of products suitable for young people are big barriers to achieving this full financial inclusion. In addition, there is often a link between guardians’ and youths’ financial inclusion which adds on to the barriers for tackling minor’s financial exclusion. An adapted regulatory framework is needed to overcome such barriers, particularly in the developing world. Financial markets have specific features: unlike for other markets, issues such as consumer protection, information management (especially when it comes to children), and (financial) education re relevant. Management fees and balance requirements may put an additional burden on consumers and increase the prices of products. In addition, in emerging markets, authorities deal with the task of fostering the supply-side of financial services to remote areas, the need to reach vulnerable groups, and the low levels of financial inclusion among adults, which in the long term hamper the opportunities for children to be included.
Both financial inclusion and financial education are gaining space in the policy-making arena and its relevance has been recognized in international scenarios such as the Asia-Pacific Economic Cooperation (APEC), the G-20, the Organization for Economic Cooperation and Development (OECD), and the United Nations (UN), among others. Particularly, financial inclusion is being considered as a topic in the construction of the post-2015 development agenda of the UN.
Latin America is a region of contrasts and deep inequality between and within its economies; child poverty in the region affects more than 200 million infants. In this scenario, adequate financial inclusion for children and adolescents can be seen as a tool to fight against these scourges; however, without a regulatory reform and the corresponding enforcement mechanisms, financial inclusion may remain an uncompleted task of policy makers and stakeholders in the financial sector.
To contribute to this field of research, in March 2014, a survey was disseminated among the main regulatory bodies of the region, to collect information about policies on child financial inclusion from 14 Latin American countries: Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Paraguay, Peru and the British overseas territory of the Virgin Islands. This document presents the key findings of the survey and explores the landscape of regulation and policies that may enhance child and youth financial inclusion in the region giving policy recommendations stemming from a cross-country analysis. The second section gives a context and background of the countries analyzed; the third contains the conceptual framework behind the importance of enhancing financial inclusion for minors; the fourth explains the methodology and shows the main trends found; the fifth shows the best practices in regulation, and finally some recommendations will be given stemming from the identified trends.