FGV, Central Bank and Gates Foundation present results of financial inclusion study

Researchers from Fundação Getulio Vargas recently presented the results of a study carried out in partnership with the Brazilian Central Bank and the Gates Foundation about the journey of low-income people toward financial inclusion in Brazil. The event took place at the FGV Cultural Center on September 25, as part of a plenary meeting organized by the G20 Global Partnership for Financial Inclusion (GPFI), which holds forums to exchange experiences between countries and international organizations with the aim of improving access to financial services for the world’s population.

The study showed that two decades of regulatory developments, together with financial innovations and public policies, have increased access to and use of services, accounts, payments and credit. However, indebtedness and constrained income have increased, showing that the quality of credit products needs to improve.

The event’s opening session was attended by the head of the Brazilian Central Bank’s Department for Promoting Financial Citizenship, Luis Mansour; the coordinator of the FGV Center for Microfinance and Financial Inclusion Studies (FGVcemif), Lauro Gonzalez; and the senior program and regulation officer at the Gates Foundation, Ariadne Plaitakis.

Partnership to include low-income people in financial system

During his opening speech, Luis Mansour pointed out that Brazil is in the final stretch of its G20 presidency and the financial inclusion journey reflects GPFI’s agenda, given that its mission has been to bring low-income people into the financial system, as well as ensuring that this inclusion brings about results in terms of greater financial stability and well-being in society.

“Financial inclusion empowers individuals and businesses, allowing them to participate in the economy. This fosters economic resilience, reduces vulnerability and supports inclusive sustainable development. Without it, society is vulnerable,” said the head of the Brazilian Central Bank’s Department for Promoting Financial Citizenship, stressing that financial inclusion is crucial to the UN Sustainable Development Goals, especially the one focused on ending poverty, SDG 1.

According to Lauro Gonzalez, Brazil is experiencing significant progress in access to and use of the financial system, and this has been driven by sector regulation and a set of public policies, including the Family Grant Program.

“To ensure that we have responsive and transparent financial services, we need to work continuously, because financial inclusion is not a one-size-fits-all solution. Each country has its own challenges and responses. Together we can create a more inclusive economy,” said the coordinator of FGVcemif.

According to Ariadne Plaitakis, the Gates Foundation’s collaboration with FGV and the Brazilian Central Bank is fundamental to research that is exploring important issues related to financial inclusion and regulation.

“One of our goals is to inspire other regulators to use the available data to support evidence-based public policies, to enable them to make more informed decisions that benefit the market and consumers. We hope that the evidence presented in this research can shape future policies to further promote financial inclusion,” she said.

Low-income people’s journey toward financial inclusion in Brazil

During a session called “New low-income entrants: How vulnerable are they and how do they use financial products and services? Presentation of Brazil’s case,” FGV researcher Rafael Felipe Schiozer outlined the findings of a research project titled “Access to and use of financial services by low-income people: Brazil’s case.”

He said that the financial markets help families become more resilient, but low-income people are still not being served satisfactorily by the financial system, which makes it necessary to understand financial service access, usage and quality.

“The Family Grant Program’s expenditure went up 250% between 2019 and 2023. It has proportionately more beneficiaries in states in Brazil’s North and Northeast regions, where Human Development Index scores tend to be lower. Over this period, the number of beneficiaries increased 50%. Women make up 58% of the beneficiaries and receive 80% of the payments,” Schiozer noted.

According to the study, another key factor in the growth of financial inclusion in recent times was the creation of PIX, the Brazilian instant payment system. The proportion of low-income adults with checking and payment accounts has increased in recent years, reaching 92% by 2023.

“Currently, around 90% of Brazilians who are beneficiaries of the Family Grant Program have at least one PIX account,” Schiozer pointed out. The researcher said that age is a key factor in the adoption of this service, as older groups, including pensioners, use PIX the least.

Schiozer’s presentation also looked at Brazilians’ access to credit and how this affects the income of low-income individuals. According to the researcher, to be considered a “credit user,” an individual needs to have used a credit card or taken out any loan in the last 12 months. Among people registered in the Cadastro Único, a national database of low-income people, 57% used credit in December 2022.

“There was also growth in the proportion of income allocated to paying back loans among all Cadastro Único segments in 2021 and 2022, and this was especially pronounced among Family Grant Program beneficiaries. In 2022, men receiving Family Grant handouts used 36% of their income to pay back loans, while women used 38%. For the Brazilian population as a whole, the range was around 25% to 27%,” said the researcher.

In this context, Schiozer warned that over-indebtedness is the main threat when it comes to the financial inclusion of low-income people. “That’s why it’s important to evaluate the quality of public programs and policies in order to understand the extent of this financial inclusion,” he concluded.

Importance of data to analyze financial inclusion

Schiozer’s talk was followed by a presentation by Lucas Teixeira, an advisor at the Brazilian Central Bank’s Department for Promoting Financial Citizenship, who pointed out that Schiozer’s research is in line with the bank’s strategic agenda for promoting financial inclusion.

“The Brazilian Central Bank monitors financial inclusion by focusing on individuals. We have a variety of data that can be integrated, including from sources outside the Central Bank, such as the federal government, the Cadastro Único and formal employees. In turn, this data is linked to banking, credit and PIX-related information, among other types. By putting all this data together, we can analyze individuals, workers, entrepreneurs and micro-entrepreneurs, and understand the financial inclusion of different groups,” Teixeira said.

According to him, it is necessary to improve the measurement of the risks of over-indebtedness among individuals, and artificial intelligence tools could help analyze the entire journey to financial inclusion.

“Almost 8 million Brazilians use credit cards and end up paying high interest rates. The Central Bank’s online platform carried out a study to analyze people’s credit card statements and we discovered some interesting facts about consumers and their behavior. Based on this evidence, we need to invest in financial education from basic education onward,” Teixeira said.

According to him, the next step is to better understand citizens’ financial journey. “We want to analyze causalities beyond correlations in order to have evidence to improve the regulations and policies for financial inclusion,” he added.

Dialogue to promote financial inclusion in Brazil

The event continued with a discussion called “Access for unbanked people and an enabling environment: Financial inclusion made possible by competition and digital public infrastructure,” moderated by Lauro Gonzalez. The speakers were Janaina Attie, head of the Brazilian Central Bank’s Financial System Regulation Department; Professor S. Rajagopalan of the International Institute of Information Technology in Bangalore; Francesca Brown, global director for policy and advocacy at Women’s World Banking; and Gilson Rodrigues, CEO of G10 Bank.

The next discussion was called “The quality of the supply of financial products and services: Policies and real examples.” The speakers were Rafael Wowk of Nubank’s Public Policy Department; Juliana Mozachi, head of the Conduct Supervision Department at the Brazilian Central Bank; Mauricio de Almeida Prado, executive director of consulting firm Plano CDE; Saku Veersamy, conduct and customer communications executive at Nedbank; and Andrés Vasquez, executive director of Bancolombia’s Nequi platform. This session was moderated by Rafe Mazer, advisor to the president of G20 GPFI.

The day’s activities ended with a discussion called “Financial well-being: Guiding financial inclusion and public policies.” The speakers were Amaury Oliva, director of sustainability, financial citizenship, consumer relations and self-regulation at the Brazilian Federation of Banks (Febraban); Sangeetha Malaiyandi, financial well-being researcher at the U.S. Consumer Financial Protection Bureau; Caroline Paranayba, director of the Benefits Department at the Brazilian Ministry for Development, Social Welfare, Families and the Fight Against Hunger; and Paul Gubbins, a consultant at FSD Kenya.

To watch a recording of the entire event, click here (in English) or here (in Portuguese).