Consolidation Incentive Access to Banking Services for 342,000 Residents of Consolidation Municipalities

The initiative aims to increase access to banking services for 342,000 residents of these municipalities. As part of this program, one bank and six financial cooperatives will open new branches by the end of 2013 in 11 consolidation municipalities, effectively doubling the number of branches from 11 to 22. This expansion will provide residents with twice as many financial options. The Consolidation Incentive leverages a significant amount of private funds, promoting public-private partnerships. The Government allocated $376,000 to cover close to half of the cost of each new branch, leveraging $515,000 in additional private funding. The average cost of opening a new branch is $81,000. This incentive-based methodology aims to obtain buy-in from financial institutions, making it an effective option for expanding access to financial services in consolidation municipalities. Located in the Catatumbo region, San Calixto is a prime example of one of the 58 municipalities prioritized by the Government of Colombia's National Territorial Consolidation Policy. The municipality's residents struggle to build their lives under challenging circumstances, with nearly 90% of the population living in extreme poverty. Access to financial services is limited, with residents having to make a 16-hour round-trip journey to reach the nearest bank. The Consolidation Incentive aims to reverse this reality by providing conditions for residents to access financial services, including opening savings accounts, withdrawing government subsidies, and applying for loans to expand their agricultural operations. The Consolidation Incentive is an innovative policy instrument that encourages financial institutions to expand their services to the most remote consolidation municipalities. The Government of Colombia is committed to co-financing $34,000 for each branch opened by financial institutions in the consolidation municipalities. This incentive is expected to provide San Calixto residents with the opportunity to visit their very own financial cooperative by the end of this year. The implementation of this policy instrument will have widespread positive effects, enabling the Government to gain credibility with residents in consolidation municipalities and demonstrating that these communities represent economic value for the country. The Consolidation Incentive will also promote legal economies, encourage business development, expand families' capacities to consume and save, and reduce the need to obtain informal credit. It will stimulate income generation for small farmers, create employment opportunities, and promote the development of productive assets. In San Calixto, close to 7,000 victimizing events and over 900 illegal land grabs have occurred, but after years of armed conflict, peace is beginning to return. The Consolidation Incentive will spur economic growth and prosperity facilitated by expanded access to financial services, promoting sustainable livelihoods and respect for the rule of law.