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Difficulties in accessing credit affect social groups in different ways. This article discusses how visibility for credit can impact the democratization of financial services and reduce these differences, promoting economic and social development.

The extensive Global Findex database, made available by the World Bank, provides an initial assessment of the degree of the relationship between income inequality and financial inclusion. In the case of Brazil, it can be seen that the difference between the access to a bank account of the 60% richest and the 40% poorest has decreased over the last few years. In 2011, 681,000,000 of the richest were banked. Among the poorest, this percentage was 37.51%, resulting in a difference of 31 percentage points.

The table for 2021 shows that banking has continued to grow in both groups. And although there is still a significant difference, the gap has narrowed: the percentage of banked people has risen to 85% among the richest and 82% among the poorest. On the world average, there has also been a reduction in the difference in access to a bank account between these groups, as shown in the graph below.

In Brazil, the first year of the pandemic, which concentrated the effort to make informal workers bankable, had a positive impact on the evolution of access to bank accounts in the lower income brackets. Although the advance in bankarization is beneficial, there is one caveat that has already been made in this space. Access to a bank account is an important indicator, monitored worldwide, but financial inclusion goes beyond this.

In the Central Bank's definition, financial inclusion is characterized by effective access to credit, savings, payments, insurance, pensions and investments. In this sense, access to a bank account is only the gateway to effective inclusion. The "Financial Inclusion Report" 2021/22, released by the British government, presents figures on the opening of basic accounts - a specific type of current account aimed at consumers who have difficulty accessing personal current accounts - and highlights that this is only the first step towards access to credit.

Visibility is key to broadening consumers' access to the credit market, whether through financial institutions or other creditors, such as retailers and service providers. Newly banked consumers would need to build up a history of transactions with the financial system before applying for higher credit limits, for example. Credit visibility ensures that credit granting institutions have information about the borrower and can assess this type of demand, regardless of the previous relationship, based on the financial history that the consumer has built up with other sectors of the economy, such as the utilities sector. Using this information is valuable for analyzing the borrower's behavior and deciding whether to approve an operation and which term and interest parameters are most in line with the customer's risk profile.

This visibility benefits consumers of all income profiles and companies of all sizes. For those who were already financially included, the increased accuracy of credit analysis through the use of a wider range of information means fairer and more appropriate credit conditions. It is hoped, however, that the benefits will be strongest for those who have always been on the margins of the financial system and who are starting from practically "zero" in terms of credit information.

The discussion of inequalities in access to financial services and income is closely linked to development. Recent literature has advanced the understanding of how these differences negatively affect economic growth, since the lack of access to credit inhibits access to financial resources for individuals, both for consumption and for entrepreneurship among the population with lower purchasing power.

In recent years, Brazil has taken important steps towards visibility for credit through credit bureaus and has created the conditions to transform the arrival of millions of consumers in the financial system into an effective and positive inclusion for the economy. This visibility will also be key to enabling the safe and more inclusive expansion of credit, with positive effects on well-being and productivity.

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By: Elias Sfeir President of ANBC & Member of the Climate Council of the City of São Paulo & Certified Advisor