Financial Inclusion, Growth and Inequality: A Model Application to Colombia

32 Pages Posted: 3 Oct 2014

Date Written: September 2014

Abstract

Financial inclusion has been one of the key pillars of Colombia’s development strategy for anumber of years. Financial inclusion policies have aimed at channeling microcredit to poor,spreading formal banking system usage, fostering electronic payment acceptance, andmaking financial services more affordable. Using simulations from a general equilibriummodel it is possible to identify the most binding financial sector frictions that precludefinancial inclusion of enterprises, and study the effects on growth and inequality of efforts toremove these frictions. The study finds that lowering contraints on collateral promises highergrowth while inequality is better tackled through measures that lower the financialparticipation cost.

Keywords: Financial services, Colombia, Banks, Income inequality, Economic growth, General equilibrium models, Financial deepening, financial inclusion, access to finance, inequality, banking, savings rate, small firms, bank accounts, bank branches, financial institution, banking system, financial institutions, microcredit, bank drafts, resource allocation, bank entry, firm size, bank assets, retained earnings, financial transaction, banking system failure, banknotes, banking crisis

JEL Classification: G20, G21, G28, O16

Suggested Citation

Karpowicz, Izabela, Financial Inclusion, Growth and Inequality: A Model Application to Colombia (September 2014). IMF Working Paper No. 14/166, Available at SSRN: https://ssrn.com/abstract=2504953

Izabela Karpowicz (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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