Could Financial Inclusion save lives in Latin America?
You don’t know what you have until you lose it. But also, you don’t know what you don’t have until you really need it.
In this crisis the world is experiencing due to the COVID-19 pandemic, governments regret not having been better prepared. They regret not having invested more in their health systems and not having protocols in place for this type of health catastrophe. That could have taken them away from the improvisation and extreme responsibility that today falls to world leaders for the health of their citizens and the welfare of their country. Some countries, of course, are better prepared than others and when all this is over we will finally know which were the best public policies implemented against the pandemic to be prepared for the next one.
We are talking about the fragility of health systems, but there is another big problem that we do not take into account and it is essential to prevent the spread of the Coronavirus: financial inclusion. Those who today are financially included and quarantined in their homes can pay their utilities, rent and make transfers from their smartphones or computers, as well as pay with cards or QR payment methods when they go shopping, thus avoiding the use of cash, which is proven to carry the virus.
Taking as an example Argentina, which has been in mandatory quarantine since March 20, we see hundreds of thousands of people outside the banks waiting to withdraw their money, mainly from pensions and subsidies provided by the State. We also see long queues to pay taxes or utilities. This cultural need to use cash jeopardizes the success (so far) of compulsory quarantine, exposing the most vulnerable — the elderly — to the danger of contagion.
“We take care of ourselves every day but today we go out because we don’t have any more money,” said one of the old woman retiree in a long queue of the bank during the quarantine. Photography by Infobae.com
In a country with better financial inclusion, all these people could be in their homes complying with the quarantine, with a debit card in their hands that allowed them to pay and consume what they needed without the need to go to a bank, exposing themselves to the Coronavirus and putting their lives at risk. It is not an excuse to say that retirees do not know how to use debit cards or that they need the cash, many learned to use a smartphone, which is a ‘complex’ skill to learn but they did it in order to be in contact with their children and grandchildren. Financial inclusion encompasses education and is something we are not doing, especially with older adults.
At the government level, implementing public policies based on behavioral economics could motivate the use of debit cards through discounts or tax refunds (in Argentina this has been implemented with sales tax and then abandoned) or even discourage the use of cash adding small extraction costs or service costs when paying in cash in public entities. All these are things, we must discuss to reach a public policy that benefits everyone.
As if this was not enough, because of the economic consequences of the quarantine, millions of people are receiving an emergency subsidy of $ 10,000 pesos and we are seeing the same problem again with the long queues at the banks. Probably much of the social and economic effort that is being made with the quarantine is in vain. The high level of informality makes the Argentine national government even consider sending cash in a letter by mail, something totally unusual. In the midst of the pandemic, it is impossible to implement solutions that we should have implemented previously. It is thus important that these long-term State policies become an essential part of the political agenda beyond the conjunctural.
It is true that both Argentina and several Latin American countries, such as Mexico or Brazil, have serious structural problems related to the enormous percentage of their informal economy. At least in the case of Argentina, it is related to a high tax burden. Still, there is no doubt that progress could be made with the implementation of smart public policies related to financial inclusion, especially for those who collect money from the State.