Governments tapped into the services to dole out emergency assistance, and the result has been a significant reduction in the number of people who rely solely on cash. To be able to store money, save money and pay with money is actually a really important part of being lifted out of poverty because it makes you more resilient to economic shocks. Fourteen countries in the region have used virtual finance tools to distribute pandemic aid, taking a cue from Africa, which has long used similar alternatives, according to the Better than Cash Alliance, a coalition of governments and international organizations pushing for digital banking options to help reduce poverty. Colombia’s success is due in large part to a robust database that quickly identified citizens who qualified for aid but did not have an account. The nation is also home to numerous virtual banking options. DaviPlata was created in 2012 by Davivienda, the country’s third-largest bank. Colombians can open an account from a smartphone and do not have to pay monthly fees or carry a minimum balance.
Countries in the region have spent on average 4.1% of their gross domestic product on tax breaks, subsidies and other fiscal measures in an attempt to stave off an economic crisis. Still, the pandemic has had catastrophic effects. The region’s GDP will fall by 9% by the end of 2020, and poverty levels will revert to figures last seen 15 years ago, according to the United Nations Economic Commission for Latin America and the Caribbean. The region’s 140 million informal workers, or half of the labor force, will bear most of the burden. Not every country has seen a banking boon. Peru – where 70% of people work in the informal economy and 60% do not have an account — has struggled to disperse aid. The government had limited success engaging the private sector and trouble identifying those who qualified. As a result, many recipients had to retrieve their aid at the Bank of the Nation in person. In rural areas, officials had to disperse aid by car. Latin America is following the example set by sub-Saharan Africa countries such as Kenya and Uganda, which for years have used telephone companies to provide vulnerable populations with financial services. Kenya alone saw a dramatic rise — from 26% to 82% — over the course of a decade thanks to such options.