Banking penetration key challenge for new Colombia association chief

Increasing the level of banking penetration and financial education are key challenges for the industry, according to Santiago Castro, the new head of Colombian banking industry association Asobancaria.

Castro took over the role this Tuesday, replacing María Mercedes Cuéllar who was recently appointed president of Latin American banks federation Felaban.

The current level of banking penetration in Colombia of around 70% is "satisfactory," the executive said in an interview with local publication El País.

However, when removing the effect of inactive accounts or savings accounts that are used solely for the purpose of receiving government subsidies, the real figure is closer to 50%.

The aim is to reach banking penetration levels of 85% by 2018, according to Castro.

REGULATORY PUSH

The new banking association head noted that boosting banking penetration is a legal obligation for banks following recent financial reforms in Colombia.

In December the country's finance ministry announced the creation of a new loan product aimed at low-income population sectors at an interest rate of 31.96% until September 2015.

This will allow people borrowing money on the informal market to access the formal banking system with more attractive rates than they would find in the non-traditional system, the ministry said in a release.

Meanwhile, the financial inclusion bill that was signed into law by President Juan Manuel Santos in October enables the creation of specialized financial entities that offer deposit and payment services.

The law is also expected to reduce the prevalence of cash as a means of payment, and give nearly 20mn Colombians access to low-cost financial products and services.