Microfinance to Reduce Gaps for the Migrant Population in Chile
If the public and private sectors, financial institutions, and civil society collaborate, financial inclusion for immigrants could be an opportunity for innovation, social cohesion, and economic growth.
Photo: Fondo Esperanza
Latin America and the Caribbean are facing the largest immigration crisis in their history. According to the United Nations Department of Economic and Social Affairs (UNDESA), the number of immigrants has doubled in the last 30 years, from 7 million in 1990 to almost 15 million in 2020.
Paradoxically, this challenge could become a tool for inclusive development if the public and private sectors and civil society collaborate to connect innovation with the economic and social growth opportunities that migration can generate.
The financial system can facilitate the social and economic integration of migrants in destination countries by providing access to and use of essential financial services (savings, payment methods, remittances, etc.) to gradually build a banking behavior history and access other services (loans, insurance, etc.), facilitating their responsible social inclusion.
In Peru, Colombia, and Ecuador, regulated financial institutions have sought to close gaps in serving migrant populations. The main barriers include lack of information in credit bureaus, migratory status, informality, and greater economic and social vulnerability.
Through banking mechanisms in these countries, knowledge obtained from savings behavior and cash flows enables the creation of tailored and affordable credit solutions.
Chile: Barriers, Challenges, and Solutions
The migrant population in Chile is primarily served by non-banking financial institutions. Additionally, there is a changing regulatory framework regarding the legality of serving irregular migrants without access to banking services.
With higher risk perception, especially for recently arrived migrants, and the lack of credit history, access to banking services is limited to regular migratory status with a Banco Estado RUT account (a no-cost transactional savings account).
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Limited support networks decrease migrants' social cohesion and affect their ability to understand and appropriately use financial solutions.
Fondo Esperanza, a pioneer in Chile with its microfinance services focused on entrepreneurship in vulnerable sectors, supports 130,000 ventures, 80% of which are women-led and nearly 5,000 belong to migrants.
From the belief that economic inclusion is essential for social integration, Fondo Esperanza provides access to financing and social products for those in regular and irregular migratory situations.
With the support of IDB Invest and the consulting firm Fundación Capital, Fondo Esperanza strengthens its value proposition by identifying the migrant profile (recent migrant, millennial, traditional migrant), designing a tailored offering, setting goals, and proposing non-financial services.
For example, one value proposition is a prepaid card linked to credit, reducing transaction costs for migrants and Fondo Esperanza. Additionally, it represents an accessible and affordable payment method currently in the viability assessment phase.
Non-financial services for the Venezuelan migrant population are challenging due to their higher educational levels, the diversity of approaches, and the use of gender and vulnerability lens. Essential information capsules on financing conditions in Chile, integration fairs, and empowerment are examples of non-financial services.
From a comprehensive and gender perspective, financial services contribute to breaking dependence and promoting the economic empowerment of migrants. They also facilitate social cohesion by fostering connections in the host community, enhancing resilience, and closing gaps.
As the next step, the proposal is to initiate dialogues between the public and private sectors to raise awareness about the importance and benefits of social and economic inclusion for migrants, strengthening the social and economic fabric. A critical factor in this process is identifying innovative financial inclusion mechanisms for migrants, encouraging more financial actors to join this trend.
IDB Invest is committed to raising awareness, developing knowledge and innovation, and providing financing for the development and growth of financial products for this new segment of inclusive and sustainable financial institutions that address the significant challenge of financial inclusion for the migrant population across the entire region.
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Authors
César Carcelén
Cesar is a Sustainable Business and MSME Specialist in the Advisory Services Division of IDB Invest. He is responsible for helping financial institutions adopt sustainable financing strategies, scale financial products focused on sustainability and aligned with the SDGs, develop thematic debt instruments, and promote the inclusion of vulnerable groups. Before joining IDB Invest he worked as a Senior Investment Officer at the impact investing fund, responsAbility Investment AG, where he focused on enhancing financial inclusion for MSMEs in the region, green credit, and sustainable housing finance. Prior to that he worked at Planet Rating with the Director for Latin America where he developed evaluations to assess the financial strength and social performance of microfinance institutions. He also worked at KPMG in the area of Risk Advisory Services. Cesar has a degree in Business Administration and Accounting, an MBA with a focus on Innovation from the EGADE Business School (TEC de Monterrey), as well as postgraduate specializations in Sustainable Finance and Climate Finance from Yale and the Frankfurt School.
Su Hyun Kim
Su Hyun Kim is a Sustainable MSME Consultant at the Advisory Service Division (ADV) of IDB Invest. She works on advisory projects that provides guidance and action plans for IDB Invest client companies to transform their operations and value chain into a sustainable one. She also works in knowledge product creation related to sustainable value chain, circular economy, silver economy, sustainability indicators, and other topics. Prior to joining IDB Invest, Su Hyun held positions related to technical assistance and advisory projects in the World Bank and IDB. She holds a Masters of Public Affairs from Cornell University and a Master of Business Administration from Columbia Business School.
Cristina Paredes
Cristina is an Investment Officer, Financial Institutions at IDB Invest, which she joined in 2005. She is responsible for originating and structuring solutions that expand access to financial services with banks and financial institutions in the Southern Cone. Upon joining the IDB Group, she participated in the origination and structuring of financing operations for the financial sector in the Group’s Debt Investment Division at the Paraguay regional office and in the Development Effectiveness and Corporate Strategy Unit in Washington, D.C. Before joining the IDB Group, she worked as Private Banking Officer at Banco Alemán Paraguayo S.A.; for the PRIME Project at USAID and as a commercial manager for a Paraguayan private company. Cristina earned a master’s degree in business administration (MBA) and a master’s degree in finance from Universidad Americana de Asunción (Paraguay), and a specialization in finance from INCAE Business School. She graduated as an accountant from Universidad Nacional de Asunción (Paraguay) and has a professional degree in agricultural administration from Universidad Comunera (Paraguay).
Karina Gómez
Karina Gómez Gálvez is the Commercial and Social Manager at Fondo Esperanza, with extensive experience in entrepreneurship, education, gender, impact studies, and microfinance for the most vulnerable sectors. She is responsible for creating and implementing the adult training model to promote entrepreneurship and empowerment for nearly 130,000 women entrepreneurs supported by Fondo Esperanza. Responsible for the creation of the institution's impact measurement and management system. She is an adjunct professor at the School of Social Work of the Pontificia Universidad Católica de Chile. In 2021, she was part of the research team for the Solidarity and Social Investment Fund (Fosis) of the Government of Chile as an expert advisor for evaluating the impact perception of the Yo Emprendo program. In 2011, she was a consultant for creating educational modules to promote female entrepreneurship for Fundación Promoción y Desarrollo de la Mujer (Prodemu), Government of Chile. In 2009, she was part of the consulting team of the IDB, Un techo para mi País, for developing the Microcredit Program. She is a Social worker from Pontificia Universidad Católica de Valparaíso, a Diploma in Adult Learning and Education from Universidad Alberto Hurtado, a Diploma in Business Administration, and a Master in Community Social Psychology from Pontificia Universidad Católica de Chile.
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