By Katie Llanos-Small
Latin America's rapidly growing middle class offers a huge
opportunity for the region's strengthening corporates, and
particularly for its financial institutions. As ever greater
numbers of people join the formal workforce, they are also
signing up for bank accounts, pensions and insurance.
But the sharply accelerating demographic shift also throws
up new problems for Latin banks, insurers and pension fund
managers, says David Bojanini, chief executive of Grupo de
Inversiones Suramericana. As financial institutions jostle for
market share in rolling out services to previously unbanked
clients, they need to work out new ways to do so.
"To advance financial services or insurance to the middle
class, and the lower-middle class, innovation is needed,"
Bojanini tells LatinFinance. "We need to think about the
avenues that are not the traditional channels of a banking
network, to form connections in ways that are much more
"The costs of very small-sized transactions through a
traditional banking network will generate losses. So it's
important to innovate, to find a way to facilitate these
transactions for middle class clients so that the costs don't
Mobile banking, already expanding in Sura's home market of
Colombia, is a good example of that, he says. Technological
innovation is also critical to increase market share among
small and medium-sized businesses, he says. It is those
enterprises where real progress can be made in expanding the
"Where banks still need to penetrate is in the smallest
businesses," he says. "For micro-businesses, SMEs, there are
guarantee mechanisms that can allow them to access bank lending
at a reasonable cost."
The financial holding company known as Grupo Sura owns close
to 27% of Bancolombia as well as pension fund and insurance
businesses in the region. It rose to prominence in 2011, when
it bought ING's financial assets in Chile, Colombia, Mexico,
Uruguay and Peru for €2.68 billion ($3.9 billion). In
early 2013, it continued its expansion, buying half of BBVA's
Peruvian pension fund.
Despite a trend for international banks - particularly
European ones - to retreat from Latin America as they focus on
difficulties at home, the presence of global lenders in the
region's markets keeps everyone alert, says Bojanini.
"It's very important to have international actors in each of
the countries. It's what forces us to be better. Today in many
of our countries, the financial sector is led by local
companies, they are local companies that have understood that
the markets are global and they have prepared for that -
they've been able to maintain a leadership position in spite of
the arrival of foreign competition."
Globalization - and the commodities boom that has come with
it - has been the most important development for Latin American
economies over the past quarter century, says Bojanini. And
while the commodities supercycle is waning, the conditions for
Latin growth are likely to remain - although his view cannot be
entirely characterized as "bullish", he says. Indeed, one of
his biggest concerns is that those conditions for growth will
The region must take advantage of opportunities to advance
further, by diversifying away from a reliance on commodities.
It also must make sure that the gains are equally shared, he
says. "That's one of the worries: that the growth is
sustainable, and that it's equally distributed," he says.
Political risk also remains a concern. Many countries have
made great strides in cementing strong institutions and
fomenting stable regulations. Colombia boasts a solid, strong
electoral system, he says.
"However, no country is exempt from political risk. Above
all in countries where there is poverty and difficult
conditions, it cannot be said that they will not fall into the
hands of a leader who will destabilize the regulatory or
"But in those countries that have a record of being stable
and supporting development, it's more unlikely that this would
materialize. I think that, for Colombia, that risk is under