20 December 2021
By Manuel Eugenio Rodríguez Troncoso, Senior Regulatory Specialist, and Xiomy Ramírez Nin, Head of the Financial Inclusion Division at the Dominican Republic’s Superintendencia de Bancos (SB)
Globally, policies that promote financial inclusion are becoming increasingly present in supervisory and regulatory financial strategies. This trend is playing an important role in achieving the Sustainable Development Goals, ranging from alleviating poverty (goal 1), gender equality (goal 5), equal opportunities (goal 10) to strong institutions (goal 16).
Financial inclusion helps integrate financial services into daily economic activities, however, barriers can prevent hundreds of thousands of citizens from benefiting from its potential economic growth to overcome poverty. This poses a challenge to the state.
SB, which is responsible for the supervision and regulation of the Dominican Republic’s banking sector, is an enabler of valuable products for underserved populations and strengthening the country’s financial system. It formed an innovation and financial inclusion team, which assists SB and the public sector in promoting products that support this vision. They are working with other teams at SB on innovation, regulation and the prevention of money laundering and financing of terrorism (AML-CFT) to enable financial inclusion while respecting financial integrity.
Furthering this was Circular 029-20, which ratifies the promotion of financial inclusion in the Dominican Republic by outlining guidelines on basic deposit products. It lists special requirements for opening an account, simplified due diligence and limitations that allow for risk mitigation with the aim of bringing unbanked citizens into the formal financial system.
Providing these basic accounts is optional for financial intermediation entities, such as commercial banks that facilitate the flow of funds from savers to borrowers. They have the same level of security and quality as traditional deposit instruments. Likewise, the minimum opening amount and average monthly balance are the same as those offered by financial entities for similar products. Service charges will be minimal, and an account may be opened in person or in a non-face-to-face manner.
In the Dominican financial system, there are two types of basic accounts: basic savings accounts and basic payroll accounts. The first is fully focused on people’s access to banking services and giving them the opportunity to have a bank account for the first time. The second is aimed at people who in the past have been penalized in their credit history for mishandling their financial products or having a criminal record.
Basic savings accounts use a risk-based approach with limits put on transaction, balance and aggregate amounts, which is in line with AML-CFT recommendations. Additionally, these accounts are only offered to nationals and foreign individuals who, at the time of completing an application to open an account, do not have a savings account or credit products in the financial system.
Meanwhile, basic payroll accounts are aimed at workers who, for legal or credit reasons, are excluded from the banking system. These accounts are exclusively used for salary payments and, unlike basic savings accounts, does not limit the number of transactions permitted per month. It is available for Dominicans, resident foreigners and non-resident foreigners. A worker’s criminal record may not be an obstacle or cause for rejection to open this type of account.
Transactions that can be made through basic savings accounts and basic payroll accounts are:
As we have seen, basic accounts are a regulatory stimulus aimed at breaking down the barriers to access that are present in the country’s financial system. Through this SB initiative, people who have never been banked, including independent workers, resident and non-resident foreigners and ex-convicts, have the opportunity to enter the formal financial system and transform their lives.
In the first 11 months since the circular was launched, 345 basic accounts were opened in 28 of the country’s 32 provinces. At the time of writing, six financial intermediation entities have made these basic accounts available. This includes Banco de Reservas, which has the greater presence at the national level.
Without a doubt, we are counting on the same level of enrollment by all entities in the financial system and we appeal to the confidence of users to approach entities that offer basic accounts with full certainty that they will find that the product opens doors to improve their household economies and, consequently, create a better country.