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AmericasMarch 30 2022

Central Bank of Ecuador promotes financial inclusion

Guillermo Avellán, general manager of Ecuador’s central bank, has been in post since June 2021, implementing a host of changes that the country’s government has been passing to modernise and grow the economy. He spoke to The Banker about deepening financial inclusion and implementing reforms to maintain a solid financial system.
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Central Bank of Ecuador promotes financial inclusion

Q: What is the status of Ecuador’s financial system?

A: The financial system is very solid. We have 24 banks, four of which are large, and many savings and loans institutions [478 in January 2022]. Banks are supervised by the Banking Superintendency, while savings and loans are supervised by the Superintendency of Popular and Solidarity Economy.

We are seeing a strong growth in loans and deposits. Deposits in the 24 banks grew last year by 10%, whereas they were up 25% in savings and loans. The same with loans: loans by banks were up 14%, while savings and loans saw 27% growth.

The growth rates are very healthy, and solvency and liquidity are high, despite the continuing impact of the Covid-19 pandemic. The financial system is very important in a dollarised economy because we do not have a lender of last resort like in economies where central banks control the local currency.

Q: What is the role of the central bank in the effort to deepen financial inclusion in Ecuador?

A: We have undertaken important changes. The legislation to attract investment, which the government submitted in February to the National Assembly [legislature], includes important reforms for the central bank and the monetary board, which is the central bank’s board of governors, and calls for the central bank play a central role in financial inclusion and education.

The reform will put the Central Bank of Ecuador in charge of determining interest rates, which is now a function of the financial board. The bank will also administer the liquidity fund. The liquidity fund is basically a savings mechanism that could be used if there were a liquidity problem in the system. These are very important changes.

The central bank is also working on an e-wallet, involving the public and private sectors, which we want to launch this year. It will allow more Ecuadorians to open accounts and use digital payment services

The central bank is also working on an e-wallet, involving the public and private sectors, which we want to launch this year. It will allow more Ecuadorians to open accounts and use digital payment services. This is even more important when we consider the expansion of microloans in 2021. This new e-wallet will allow them to open accounts quickly, generate a credit history and have access to the financial system.

Ecuador has one of the highest ratios of cash payments to gross domestic product in the region today. It is close to 20%, while in neighbouring countries it is below 10%, so we need to undertake measures to promote digital payments.

A first step was the bank’s decision to eliminate the charge for receiving transfers. Under the previous government, the cost of sending a transfer was $0.40 and $0.22 to receive a transfer. Eliminating the charge to receive transfers has helped promote their use. Digital payments increased by 24% in December 2021, whereas they had only increased by 8% in December 2020.

Q: What is being done to regulate fintech?

A: The central bank has registered 56 fintechs, and the country’s Law of Entrepreneurship and Innovation supports fintechs and regulates services such as crowdfunding.

The legislature is currently discussing a new fintech law and the central bank has provided input. We have recommended that each fintech have a single objective as a way of facilitating oversight and regulation.

Q: What is the central bank’s approach to crypto-assets?

A: In February the monetary board approved a resolution that confirmed the US dollar as the legal tender in Ecuador, so there will not be another currency.

At the central bank, we are aware that crypto-assets are a reality and we have formed a team that is receiving international technical assistance to prepare an effective and efficient regulation for crypto-assets. The regulation needs to be rigorous because there are risks like asset-laundering.

Q: What is the bank’s role in the privatisation of Banco del Pacífico?

A: The central bank owns three financial agencies: National Financial Corporation, which controls Banco del Pacífico; BanEcuador; and National Popular Finance Corporation. These three agencies were ‘sold’ to the Ministry of Economy and Finance last year as part of the Law to Defend Dollarisation. The law required the central bank to unload assets to increase liquidity. The value was around $2.4bn and there is a timeline for the ministry to transfer the amount to the bank to increase our asset level.

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Read more about:  Americas , Americas , Ecuador