Bankarization in Cuba

The process of bankarization in Cuba

Banking penetration in Cuba: solution or problem?

With only two months to go before the first anniversary of the beginning of the bankarization process in Cuba, President Díaz-Canel's podcast delved into the main problems and perspectives

Author: Correspondents' Editorial | internet@granma.cu

"With the transparency that we can achieve in bankarization, we will be defending -at the local level- one of the sources of income through taxation for the budgets, with which the growth and economic and social development of each of the territories is boosted".

This was stated by the First Secretary of the Central Committee of the Communist Party of Cuba and President of the Republic, Miguel Díaz-Canel Bermúdez, in the eighth episode of his podcast From the Presidency, in which he delved into the particularities that have distinguished the process of bankarization in the country, an issue not exempt from limitations, with multiple potentialities yet to be exploited.

"The population is telling us what needs to be done, is telling us where the dissatisfactions are and is recognizing that we have lacked action", said the Head of State, at the beginning of the space, which was attended by Juana Lilia Delgado Portal and Alberto Quiñones Betancourt, president and vice-president of the Central Bank of Cuba (BCC).

Considered by the President as one of the most important processes of the digital transformation of Cuban society, the bancarization, he said, helps to recompose a whole group of elements that are part of the country's macroeconomic stabilization program, and is associated, among other elements, to the control of the levels of cash in circulation, as well as the relationship between the monetary mass in national currency and in foreign currency.

Although it is possible to speak of progress in the implementation of this mechanism in the island, with barely two months left to go before the first anniversary of its launching, the actions that have been carried out and, in turn, the control exercised over them, continue to be insufficient.

However, even though the greatest impulse to the process coincided with the critical situation of cash availability that existed at that time in the banks, the Cuban President acknowledged that, in the light of these days, and based on the analyses that have been carried out, it is possible to assure "that the situation would have been worse if the bancarization had not been initiated".

BANKARIZATION, WHAT FOR?

Does the bancarization not have a positive balance, is it only to get paid, why so much bancarization, if it is a problem to extract money?  These were some of the questions drawn from the people's opinions, shared by Díaz-Canel.

When discussing the urgency and the need to improve the implementation of the process, Delgado Portal - head of the BCC - emphasized its importance to achieve a more efficient management of money, because "it helps to create a credit history in the case of people who have access to banking products, and who are interested in obtaining credit".

At the same time, he considered, it promotes savings and constitutes an important mechanism to support the development of the economy and reduce the use of cash.

BANKARIZATION AS A SYSTEM

Regarding several of the problems that have arisen during this period -some associated with the implementation itself, and others caused by distortions or deviations from what was proposed- the vice president of the Central Bank of Cuba, Alberto Quiñones Betancourt, acknowledged that "the practical application of some measures showed that not all the conditions for their application were created".

This is a process, he added, for which "not only will is required, but also investments".

Likewise, associated to criteria manifested by the population, he highlighted the differences that exist between transfer and online payment, and how the latter has been being violated in certain commerce to the detriment of the people.  "No commerce can attribute to itself the right not to accept payment by the means that the client decides, and, in addition, to do so taking into account all that is established", he said.

The process of bankarization, he said, started from "the premise of being better than what we had, which has not been achieved, that is, today there is still a dissatisfaction due to the need of people to continue requiring cash to make payments".

Currently, Quiñones considered, there has been progress in digital payments, but not at the level that the country needs: "Today cash is still being used.  Month after month more cash continues to be left out: it is not that cash is not used, but that it has to circulate".

At this point, the President of the Republic intervened, pointing out that bankarization should work as a system: "It makes no sense that, if I have my salary put on a magnetic card, then I have to go to an ATM to withdraw cash to pay for goods and services, when the logical thing is that I can, with that card, make electronic payments".

Sometimes - Díaz-Canel added - the concept of bankarization has been restricted to the use of ATMs, and it is quite the opposite: "as we advance in the process of bankarization, we will require less cash and, therefore, we will go to ATMs less".

That is why, according to Quiñones, the country has called for banking transactions: "It is not only that you have an account, not only that you have access, but also that you have the possibility of using that bank account".

In that sense, he ratified that in some places the gradualness in the application of the measures was not achieved, and certain processes were accelerated, which not only depended on the will to do, but also on a previous financial training and education, which were not always complied with.

IS THERE NO MONEY IN THE CUBAN ECONOMY?

In response to one of the questions of the population, launched by the Head of State, the Minister of the Central Bank of Cuba, Juana Lilia Delgado, argued that it is not about the non-existence of money in the country's economy, but that "there is more money than ever" circulating, but the flow has been reversed.

In other words, there is more money leaving the banking system than is returning, and it is concentrated in a few hands.  This, therefore, alters the whole cycle of the movement of cash, and "it is therefore difficult to cover the demands".

This accumulation of money in few places, according to the investigations, is due to pending payments to the Treasury by some economic actors.

Among other issues addressed during the podcast, the importance of having two payment gateways of its own was highlighted: Transfermóvil and EnZona, which grants sovereignty to the country to carry out the process of bankarization.

Reference was also made to tax evasion and how bankarization can contribute to its control; to the reluctance of economic actors, both state and private, to embrace the process; as well as to the complaints filed by workers in the rural and education sectors on the matter.

In this sense, the President of the Bank assured that "all possible measures and variants are being adopted to try to minimize the effects, especially on the salaried sector and Social Security pensioners".

The Head of State said that, although there is a wide range of actions and areas in this process, it is a premise to prioritize those that will have the greatest impact.  For example, "if 70% of Cubans' income today is spent on food purchases, one of the first things we have to achieve is to ensure that the services provided in the agricultural markets are well banked".

Finally, he insisted on the strategic importance of carrying out the process, for which, he pointed out, an action plan has been designed that "includes severe control actions to correct the existing distortions in the shortest possible time".

Among the most important actions of the macroeconomic stabilization program, he reaffirmed, are the contributions that this process can make.

Bankarization, he stressed, is not the cause of these problems.  The cause lies in the failure to control it adequately.  The solution to these problems lies in banking penetration, concluded the President.

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