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GUATEMALA: FINANCE AND BANKING
Modern Technology Clears Banking Hurdles
With the majority of its population shut out of the traditional banking system, Guatemala relies on a combi- nation of traditional and non-traditional banking products to meet the varied needs of businesses and private citizens. Two innovations, mobile money and microfinance, are making a difference.
Guatemala is home to 18 fiercely competitive banks, but they serve only 40 percent of the population. The remaining 60 per- cent of citizens are shut out from traditional banking services. How does Guatemala plan to reconcile this dilemma?
Most Guatemalan banks are privately held, with few owned by foreign institutions, and the top five dominate the market, with about 82 percent of market share based on assets. The success of these five banks has translated to expansion into El Salvador, Honduras, and the United States, but paradoxically has not led to an increase in affordable services to customers.
Indeed, according to FINCA Guatemala, the 60 percent of the population that is “financially excluded” do not have accounts at any formal banking institution. They must still pay for their goods and services, however, and are thus fertile ground for the growth of innovation in banking practices.
WITHIN THE SYSTEM
Guatemala’s central bank, the Bank of Guatemala (BANGUAT), is vested by the Constitution with the exclusive right to is-
sue and regulate the currency (the quetzal). The bank is also charged with regulating the circulation of all other currencies used within the nation’s borders and with maintaining all mat- ters relating to the public debt.
First introduced in 1925, the quetzal was pegged to the U.S. dollar on a one-for-one basis until 1987, when its value was permitted to float freely. For the past several years, the quetzal has remained relatively stable at around US $0.13. Guatemala’s foreign currency income is derived primarily from its exports, which stood at US $10,884.4 billion through October of 2015. In addition, many Guatemalans receive remittances from family members working abroad, totaling about two-thirds of exports.
STRENGTHENED BY REFORM
To address a lack of confidence in its financial institutions and banking system, Guatemala enacted several reforms in the early part of the 21st century aimed at modernizing and strengthen- ing the country’s banking laws. The reforms of 2002 addressed the country’s banking system, its currency and convertibility, and overall financial supervision. This legislation reaffirmed the Bank of Guatemala as the nation’s central bank and placed it, together with all other financial entities, under the supervision of the Superintendency of Banks.
2008 saw the modernization of Guatemala’s securities laws, and its insurance laws were modernized in 2010. A second package of banking regulations, enacted in 2012 and based on the experience of the preceding decade, essentially provided
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