Financial inclusion is a fundamental pillar of development. But Mexico poses a conundrum. In many respects it has been successful at growing its economy and integrating with global markets. Yet among its peers in Latin America, Mexico is the worst-performing at financial inclusion relative to its income; at 36.9%, its rate of inclusion only surpasses three other countries regionally—all with much lower per capita incomes.
Identifying and Verifying Customers: When are KYC Requirements Likely to Become Constraints on Financial Inclusion?
Onerous KYC documentation requirements are widely recognized as a potential constraint to full financial inclusion. However, it is sometimes difficult to judge the extent to which this constraint is a serious or binding one, relative to others. The paper considers this question, distinguishing between different types of documentation and different financial market segments according to their KYC requirements.
This work analyzes fresh data made available by updated, more comprehensive Enterprise Surveys of formal firms of various sizes and, importantly, of informal firms. It concentrates on five countries (the DRC, Ghana, Kenya, Myanmar, and Rwanda) to provide more fine-grained insights into differences in characteristics and productivity levels between formal and informal firms or different sizes in different developing countries.
Balancing Financial Integrity with Financial Inclusion: The Risk-Based Approach to “Know Your Customer”
Recognizing the importance of financial inclusion as a policy objective, regulators have endorsed the use of a risk-based approach (RBA) towards know-your-customer (KYC) requirements aimed at strengthening financial integrity. This paper considers applications of the RBA in domestic banking, mobile money and international financial transactions against the features of a rigorous RBA where both the rigor and level of due diligence and the structure and balance of incentives should be proportional to the balance of risks, including that of exclusion. Recommendations include greater attention to national identification systems and to encourage the use of digital technology to shift from cash-cash wire transfers to more transparent account-account transactions between identified holders.