37th REGULAR MEETING OF THE ALIDE GENERAL ASSEMBLY 2007
 
INCLUSIVE GROWTH: FINANCING, SOCIAL RESPONSABILITY AND CHALLENGES FOR LATIN AMERICAN DEVELOPMENT BANKING
Montevideo, Uruguay, 24-25 May, 2007    
 
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Asociación Latinoamericana de Instituciones Financieras para el Desarrollo
Banco República Oriental Del Uruguay
ALIDE 37

Danilo Astori (first on the right), Minister of Economy and Finance of Uruguay, made the opening speech of the Thirty-Seventh ALIDE General Assembly.

INCLUSIVE GROWTH: THE CHALLENGE FOR DEVELOPMENT BANKING

Development financing from a socially inclusive perspective and the function and role of development banking were the key topic addressed by the Thirty-Seventh Regular Meeting of the ALIDE General Assembly, held at the Sheraton Hotel in Montevideo, Uruguay, on May 24 and 25. The event brought together 197 participants, 162 of them belonging to institutions in 19 Latin American and Caribbean countries; 9 from 7 countries outside the region (Canada, China, France, Germany, Holland, Spain, and the United States), and 26 representing 13 international organizations and cooperative institutions.

Organized with the collaboration of Banco de la República Oriental del Uruguay (BROU), the Meeting was opened by Uruguay’s Minister of Economy and Finance, Danilo Astori. The Minister underscored the importance of studying the role of and challenges facing the development banking system in the present situation, in which it must be borne in mind that while our economic growth is essential, it is not enough, of itself, to produce development, which also involves basic concepts like social justice, through which more equity is sought, particularly for those who have suffered the consequences of the crises in our countries, and sustainable development that takes care to ensure environmental measures and safeguards the conservation of our basic resources.

It was stated at the Meeting that the low level of financial inclusion in Latin America and the Caribbean is nothing more than the reflection of financial markets with little development and depth. Furthermore, inasmuch as our financial systems are basically bank-oriented and short-term, the securities markets (which should provide the long-term resources) have among the world’s lowest levels of capitalization –in the neighborhood of 20%. These markets are markedly procyclical: credit grows faster than the product during boom periods and drops more heavily during crises, fueling the fluctuation of economic cycles. In addition, access to financial services is unequal, for less than 5% of the poor have access to credit and less than 15% to savings, in comparison with families that are not poor, in which case the figures are 8% and 33%, respectively.

Evidence shows that market mechanisms alone have not been sufficient to promote access to financing and that, for that reason, public policies are needed to cope with market failures and to promote financial development. Furthermore, improving access to the financing system requires the participation of the development and the commercial banking systems, as well as of the capital market. In this case, development banking serves as an instrument for harmonizing commercial criteria with public policy in order to cope with problems associated with transaction costs and information asymmetries.

It was pointed out, in addition, that inclusion must be viewed from a threefold perspective: (a) as an ethical imperative and also one of economic right; (b) as a lever for development for both people and our countries; and (c) as an opportunity to do new business and for innovation. Viewed in that way, financial inclusion is a benefit for our countries that should be strongly promoted.

It was stressed that an inclusive financial sector requires universal access to all financial services at reasonable costs; strong institutions guided by specific regulations; financial and institutional sustainability; and multiple service providers that will ensure competitiveness and transparency. It also calls for a general political context that includes: equitable growth, macroeconomic equilibrium, strong institutions, a healthy financial sector, competition, diversity and transparency. Likewise, interest rates that are in line with the microfinancial situation, where the ceilings on those rates limit the access to loans by the most needy sectors; of a cost policy, because it is necessary to offset the higher costs associated with the smaller microfinancial operations with appropriate costs and the development of products to reduce other costs for institutions. It is important to recall, as well, that an inclusive financial sector should provide related non-financial services like training and information, among others.
 
DECLARATION OF MONTEVIDEO

As a result of the Meeting, the financial institutions left their position and commitment on record by formulating the
Declaration of Montevideo. In this instrument, they set down their opinions about poverty and social inclusion; development banking regulation and supervision; the importance of micro and small business as an employment generator for moving ahead in the effort to alleviate poverty; and the need to adopt corporate governance policies and practices to improve the management of our institutions and to safeguard them from external interference in their management.
 
FINAL REPORT
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DECLARATION OF MONTEVIDEO
THIRTY-SEVENTH REGULAR MEETING OF THE ALIDE GENERAL ASSEMBLY
May 24 - 25, Montevideo, Uruguay
“INCLUSIVE GROWTH: FINANCING, SOCIAL RESPONSIBILITY AND CHALLENGES FOR LATIN AMERICAN DEVELOPMENT BANKING”
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