This bill regulates the transfer, chargeback and investment of funds deposited in accounts that have been abandoned.  

Abandoned accounts were regulated under Law 1777/2016, which defines them as current or savings accounts where no debit or credit movements have taken place for three years, i.e, no deposit, withdrawal or transfer of any kind of transaction during the entire period.

This draft indicates that entities holding “abandoned accounts” must send to The Colombian Educational Credit Institute (ICETEX) a list with a breakdown of abandoned accounts and their balances, which will be transferred to a special fund under ICETEX administration, with the money coming from the abandoned accounts being transferred as mutual funds.  

The first transfer of such funds must take place no later than 1st August 2016, and thereafter every quarter. Subsequently, should any account holders wish to withdraw their money, the entities must let them do so in no more than one day, and should then request a chargeback from ICETEX.

Once the decree comes into force and until 30th June 2016, financial institutions must give information on the provisions of Law 1777/2016 to their account holders with current or savings accounts that have not shown credit or debit movements for three years running, explaining that these will become applicable after 1st August 2016.

The bill also indicates that the transfer of balances against abandoned accounts to the special fund managed by ICETEX will not entail any change in the balances shown in the holders’ statements, nor will it in any way restrict the holders’ ability to draw money against their accounts.  

The draft legislation also establishes that ICETEX will invest a percentage of the funds in sight and term deposits in financial institutions with AA+ or equivalent ratings. An auction will be held every 6 months to define which institutions will receive such sight deposits and every year for term deposits.

Rebeca Grynspan in the Ibero-American secretariat general

You have held many important posts in your career: vice-president of Costa Rica, under-secretary general of the United Nations and associate administrator of the UN Development Programme (UNDP), for which you were also regional director for Latin America and the Caribbean. And now you are the first woman to become secretary general for the Ibero-American Conference.

Your professional track-record is an example of how women can take on leadership positions, which makes it a special honour for us to interview you for this March issue of Progreso, since during this month we will all be celebrating International Women’s Day.

1. In 2014 you were unanimously elected by the 22 member states of the Ibero-American Conference to become its secretary general, the first woman to hold this position. What are the most challenging issues facing the Ibero-American secretariat general?

The Ibero-American secretariat general is undergoing a process of renewal that started in 2012 at the 22nd Ibero-American Summit in Cadiz and culminated in 2014 with the Veracruz Resolution, in which the heads of state and heads of government entrusted us  with a set of specific measures to better integrate the Ibero-American system, so that it would have greater influence and more impact, working in closer coordination with the governments within the Ibero-American Community.

This renewal is the biggest challenge we have taken up, as it means adapting the Ibero-American institutional set-up to a reality quite different from that which accompanied its creation. Both the Latin American as well as the Iberian countries have changed enormously over the last two decades, and such changes require a more symmetrical and horizontal relationship between the two groups and between them and Europe. At the same time, the panorama of regional integration is far more complex now, with new players, new organisations and co-existing initiatives, which motivates us to seek out the areas where we can make the biggest difference.

2. What are the next initiatives the Ibero-American secretariat general (SEGIB) is taking to strengthen cooperation among the Ibero-American countries?

One of the most important mandates we received at Veracruz was, precisely, to boost Ibero-American cooperation, focussing on three priority areas or “spaces”: culture, knowledge and social cohesion. We have been working on establishing the right structure for each of these and, very importantly, to take a more systematic approach to information on cooperation projects. Only too often, opportunities have not been taken up simply because people did not know they existed or found it too hard to dredge through the information. Our aim is to increase the articulation, visibility and effectiveness of Ibero-American cooperation, which is already seen as an international model of South-South and triangular cooperation, widely acknowledged as dynamic, horizontal and innovative.

In what we call the Knowledge Space, we have launched one of SEGIB’s key initiatives, inspired by the European Erasmus programme: the Partnership for Academic Mobility. We aim to have 200,000 students moving elsewhere to study from now to 2020. We have managed to gather more and more support, both from higher-education institutions and from the private sector, to fund the programme. The private sector has already committed funding for at least 40,000 student exchanges, which sets us well on track to achieve our goal by 2020.

There is a lot of scope for the Partnership for Academic Mobility to grow. According to UNESCO figures for the entire world, there are now over four million university students studying abroad. This is double the number from the year 2000. Academic mobility varies enormously from region to region. More than 7% of university students from Asia are studying abroad, whereas less than 1% of Latin-American university students do so. In fact, Latin America is the region with the lowest student mobility in the world. This means there is a lot of upside for countries to take advantage of their complementarities and increase cooperation among their study and research institutions. Academic mobility can be an excellent way for our educational systems to improve their quality and satisfy the growing demand for higher education that accompanies the burgeoning of the middle classes in Latin America.  

3. Latin America has been a pioneer in establishing a legal framework to promote public policies that guarantee gender equality. However, the region reports very high indices of femicide and gender-based discrimination. What public and private measures or policies are necessary to foster greater respect for women’s human rights in the region?

You are right that Latin America has been a pioneer in positive-discrimination laws to advance gender equality and the political representation of women at the highest levels of government. At present, it is the region with the highest ratio of female members of parliament, well above the average world-wide. At the same time, there is probably no other region that has elected so many female presidents as Latin America has over the last ten or fifteen years. So we can see positive examples of progress towards gender equality in the region. However, gender violence is still a very open wound in the region.

The fact that about 15 countries in the region have had to change their criminal code to establish the crime of femicide, so that the murder of women simply because they are women could be included on the statute book, is a very negative symptom. Throughout the region, there is great concern about the high figures of gender violence and femicide we suffer. That means we have a long way yet to go.

Likewise, in the economy, although there has been a massive incorporation of women onto the labour market, it is also true that the wage gap between men and women has not disappeared. There is still a major wage gap, whether you measure it for the same work or the same educational level.

This means that despite the gains, both in the political arena and in the economic and social spheres, women continue to encounter considerable, often invisible, barriers and manifestations of discrimination in the exercise of their rights.. So gender equality must continue to be a touchstone for all action programmes of governments, public policies, and international bodies.  

4. This is an historic moment for Latin American women’s political participation and leadership. The region has the highest percentage of female members of parliament in the entire world. However, at the local level, political representation continues to be dominated by men. How should the problem of low female participation in local politics be tackled?  

Indeed, only between 16% and 18% of mayors in the region are women. The political representation of women at the local level has not evolved with the same intensity as it has in national parliaments. In part this is due to the lack of positive-discrimination laws at the local level.  

Studies show that countries without positive-discrimination laws at the parliamentary level, for example, tend to have volatile, unstable ratios of female representation. Although at one particular moment they may have an acceptable representation, this may not necessarily be repeated. There is also the problem of not reaching a critical mass, because the idea is not to have one woman in parliament, but to have a sufficient number of women in parliament to be able to rewrite the agenda. Some researchers into this field suggest that the minimum threshold for such critical mass is 30% representation, in order to have sufficient clout to move the gender agenda at national level. Countries that do not have positive-discrimination laws and stable representation percentages have a harder time changing the national status quo.

That is what is happening at local level. From the moment that local governments became more influential, with more political power, more resources, the fight for political representation has intensified. So, despite the fact that women are highly represented in local civil society and participate actively in community organisations, they have been side-lined in accessing local political representation. Some women’s organisations have even begun to talk of political violence, which has become more visible at the local level. In fact, we have had some shocking examples of this phenomenon.

Thus, we should discuss whether positive discrimination quotas need to be set locally; whether there are ways to put pressure on political parties to include more women on their lists of candidates for mayors and councillors. And we must definitely increase local training programmes, which have been lagging behind compared to the empowerment and training opportunities available to women representatives at the national level. These are the three fields where I think action is required to make it possible to boost women’s participation and representation in local governments.

The final stumbling block, especially now at the local level, is the issue of funding. Campaigns are expensive and women often have less access to money. So, all laws that make it possible to obtain public funding for campaigns will help to open up equitable representation opportunities at the local level.

5. More than half the women in Latin America work under precarious conditions in the informal economy, with very limited access to the social security system. What would be necessary to bring women out of the informal economy and offer them some kind of safety networks?

This is a very important question. The over-representation of women in the informal economy is a fact, as is women’s low level of coverage from pensions and social security. I believe we must act on several fronts: first of all, to attain measures to improve home-work life reconciliation, which becomes a central piece to also achieve better societies in the future. The issue of home-work balance does not only concern women. It also involves men. We must have more policies and rules recognising the need for reconciliation of work and home life, with maternity and paternity leave; better hours; more flexibility, and days or hours that can be used to deal with family needs and emergencies. And these things must come to be seen as natural in the workplace and not something that is going to hamper women’s possibilities of moving up the business pyramid. They are fundamental elements of equality. This would also help to move women out of the informal economy because many women have no alternative but to work informally, simply because they do not have anyone to look after their family when they work.

The second front is the need to develop the care network much more. Women who do not have access to the care network cannot move into the formal labour market, because they have no support infrastructure. I want to emphasise that the reconciliation of home and work is not just a matter for negotiation within each household, with one’s partner. It is a social issue. It is the joint responsibility of the labour market, the state and society as a whole, alongside the families and couples involved. And this is very important, because it is also a matter of the capacity to socialise future generations. It is something that we should all concern ourselves with.

Moreover, we know that women’s capacity to move into the labour market and generate income is a vital part of the fight against poverty. On average, in Latin America poverty is about 10 percentage points less when there is female income in the household. So, strengthening the care network affects the mental and social well-being of future generations, the fight against poverty and the construction of fairer, more equitable societies.

The third front is programmes to give women access to credit and training, which are a fundamental element in equalling out opportunities for the future.

Regarding the social protection system, access to the formal economy triggers the social security benefits that are linked to it.. There is an interesting debate going on about whether social security systems should be reformed so that they not only protect workers in the formal economy, but also in the informal economy. That is, social security systems should be decoupled from the formal or informal nature of the job, and linked much more to the individual and his or her income.

This is a very broad-ranging debate, and it is linked to the discussion about whether countries should go for contribution-based systems or tax-funded systems. I am convinced there should be a combination of the two. Latin American countries, with their high levels of inequality and fiscal burden, cannot move towards a Scandinavian-style system where social security is financed by taxes paid by everyone. Contribution-based systems are important, so we should be able to follow the example of Costa Rica, which is to have a multi-pillar system. Costa Rica, Colombia, Mexico, and more recently, Brazil have all implemented multi-pillar systems. A serious discussion of the pros and contras of the solutions or proposals that have been developing over the last few years are advisable and necessary.

The gender issue is also involved in this debate, for example in the discussion, which has not been resolved, about the trade-off between the age of retirement and the density of contributions paid in. The possibility of women being pensioned earlier was a demand which I think will have to be replaced by a pension age relating to the density of payments into the system, which is the real problem for many women who are not entitled to a pension.  Since women tend to move in and out of the labour market (precisely for family reasons, such as taking care of children and the elderly) and sometimes are engaged in the formal and sometimes in the informal market, the number of contributions necessary for a pension becomes an insurmountable barrier to getting a pension. It is rather paradoxical that many women finance part of the system, without ever receiving any benefit.

6. Do you consider microfinance to be a useful tool for empowering women and supporting their social and economic development? What do you see as its greatest strengths and weaknesses and how could its impact be enhanced?

I think that studies demonstrate that access to credit and microfinance has been an enormously useful tool in empowering women. We all know about some of the most successful instances world-wide, such as the Grameen Bank. But several schemes have been developed specifically to give women access to borrowing.

Several people believe that microlending should be subsidised credit. Personally, what I see is that women have no access to a formal system where they are able to borrow quite small sums, so they often fall into the hands of loan-sharks and end up paying unnecessarily high interest rates. It is doubtlessly true that microlending interest rates are higher than on regular bank loans, because they entail higher transaction costs. However, even if the interest rates are higher, they are still a much better option than going to the local loan-shark in your community. This is the strength of the microfinance model.

I think its weakness is when the systems are precarious; when they fail to include the elements we spoke of earlier, for giving women skills and supporting their ability to manage small enterprises. What are most expensive are precisely the support measures, when we are trying to reach out to these more vulnerable sectors, often without much formal education. It makes sense to charge higher interest rates if this gives women access to services that will enable them to use loans for their own personal and economic development.

7. The BBVA Microfinance Foundation encourages the formalisation of the microfinance industry, promoting good corporate governance and the application of leading-edge technology in their entities, in order to facilitate a closer relationship with customers. What do you see as the main challenges before the microfinance industry?

I think the BBVA Microfinance Foundation is the example to follow. As you so rightly say, the BBVA Microfinance Foundation has had much success in developing microfinance. It has fostered the formalisation of the sector; has committed itself to good corporate governance; and has tried to harness the latest technology and telecommunications and the digital economy to make it easier to reach customers. This has an impact on remote places with poor infrastructure and poor access to markets and has turned it into a benchmark for the industry.

Informal microfinance may in some cases have an impact on subsistence, but does not bring people out of poverty. If we want microfinance to really become an instrument for economic development and overcoming poverty, the example of BBVA Microfinance Foundation is the model we should follow.

One of the challenges in the microfinance sector is how to connect the flow of funding, how to create a system in which microfinance is linked to existing credit funds and not just to funds created separately especially for microfinance. It means working out how to create a system that can harness the skills of the organisations that know how to do microfinance, where the loan-book of the formal banking system can generate second-tier funding that can feed into the microfinance system.   

8. What are the advantages and disadvantages of state transfers, even beyond the conditional cash transfer programmes? Are such transfers complements or substitutes for microfinance programmes? What role should be played by each?

Cash transfer programmes conditional on income have been a very important innovation in the Latin-American region’s social policies. 135 million people are currently benefitting from such programmes, with Brazil and Mexico having the largest programmes. Such schemes have different features. Some include elements such as nutrition, child care or savings.

In order to assess them correctly, we must first understand what the conditional cash transfer programmes were aiming at. They were not intended to combat today’s poverty but to tackle tomorrow’s poverty. They were to fight inter-generational transmission of poverty. Because if we fail to invest in infant nutrition from before babies are born until the age of two; if we cannot incorporate them to education systems; if we do not take care of their health, then their opportunities of escaping poverty in the future will be cut short before they even start. It is like sealing their fate at birth, just because of the family they are born into. Of course, when one transfers income to the poorest families, it has an impact on today’s poverty. But that is not the impact we are aiming for. The impact we seek is the impact on the capacities of new generations to escape poverty.

Why does this not replace access to credit and to microfinance? Why does it not substitute job possibilities? Because skills have to be matched up with opportunities. Having skills does give people an advantage, but then opportunities must be created if they are to put these skills to use; so that they can set up a business, create a micro-enterprise, find a job, get into an economic pattern that opens up doors to get some return on the education and learning they have received.

There is a study into this, carried out in Mexico many years ago when they started such programmes, which monitored young people who had had access to education through conditional transfers and compared them against communities where there had been no such access. The question was: did the people with more education do better? The answer was yes and no. Those who remained in their communities did not do better, without any economic opportunity to monetise their education. They were stuck in communities where the same old economic patterns prevailed. Those who migrated did better, because they could take their skills with them. Human capital travels with humans. So the skills had been created, but not the opportunities. Our conclusion would be that one cannot expect one single programme to solve all problems.

Part of the agenda is creating such economic opportunities, and there, lending and microfinance have been playing a very important role, especially with more highly skilled people, who can make better use of the resources.  

9. If you had to cite a milestone in the advance towards gender equality in Latin America, what would it be?

Managing to get over 15 countries to adopt equality laws for gender equity and positive-discrimination policies in political representation has created a critical mass in the region and has already allowed significant progress in boosting women’s parliamentary representation and the number of female candidates in national elections.  Five countries have gone even further and have adopted parity legislation at the department level.

If I can have a second, it would be women’s access to the educational system, where we even see a worrying gender gap working the other way round now in some countries, where men are outnumbered in secondary and university education.

10. What book or film would you like to recommend to our readers?

The book The Man who loved Dogs, by Leonardo Padura. And the film Son of Saul, which is currently showing in cinemas.

11. What person, historical or not, has had the biggest impact on your life?

It is not really a person, but a movement. The feminist movement. The fight for women’s suffrage; the fight for equality; all the women who, despite facing difficult situations in their personal or family life, managed to open spaces that today’s women have been able to take advantage of. This movement includes women from many countries and latitudes, from Susan B. Anthony in the United States to Paulina Luisi in Uruguay or Ángela Acuña in Costa Rica, to name but a few examples.

Within its policy of facilitating access to credit in Colombia, the government establishes guarantee programmes through the National Guarantee Fund (known by its Spanish acronym as FNG). The FNG promotes the provision of microcredits by the formal financial industry, to the low-income people.

The present circular defines a new exposure limit per borrower that the FNG must comply with, known as the Maximum Discretionary Value or VMD. This is intended to avoid the over-indebtedness of the clients.

From 1st February 2016, VMD per borrower will be increased to COP $1,560,000,000 (approx. USD $520,000). It means that the FNG shall not authorise a loan or collateral to a given borrower that, on its own or all debts considered, exceed the new exposure limit per borrower.

These guarantee programs are fundamental for the provision of microcredits to the low-income people, because of the higher risk profile of the typical micro-borrowers. State guarantees make it possible to grant microcredits to a greater number of people who, without such finance, would be unable to access finance.

Consequently, the increase in the limit on exposure per borrower or Maximum Discretionary Value (VMD) for the FNG makes it possible to spread a greater amount of funding to the economic sector of micro-borrowers, which enables them to get out of poverty.  

The Colombian parliament has published the law creating Zones of Interest for Rural, Economic and Social Development (known by their Spanish acronym as “ZIDRES”). These are territories considered to be of interest for farming by the rural planning unit, Unidad de Planificación Agropecuaria Rural, on the basis of rural development plans.

As we mentioned in Progreso 4 when describing the bill put to parliament, the ZIDRES must be at a substantial distance from larger towns, require high investment to get into production, be in an area of low population density and high poverty indices or lack minimal infrastructure for the transport and sale of produce.

The ZIDRES are intended to act as a new model of regional economic development, by promoting:

(i) access and regularisation of the farmers ownership rights to the land;

(ii) inclusion of peasants, rural women, farm workers and others into the social and productive fabric of their environments;

(iii) development of infrastructure;

(iv) social and environmental responsibility among businesses;

(v)  food production.

Production projects carried out in the ZIDRES must be suitable for achieving these goals and helping to internationalise the economy. Studies must be made into their feasibility and there must be agreements with the owners or holders of the lands where they are located. They must comply with all the elements of the law.

The projects must be filed with the Ministry for Agriculture & Rural Development.

The search for economic development in these regions now known as ZIDRES, will encourage farmers to create small-scale production units that can improve the quality of life for the local communities. It is also an opportunity for microfinance entities, which can provide the financial muscle to develop regions only too often left on the side-lines of the country’s key business and economic activities.

The Economist Intelligence Unit has published the 2015 Global Microscope, with the support of the Multilateral Investment Fund (MIF), CAF, the Latin American Development Bank, the Center for Financial Inclusion at Accion and the MetLife Foundation.

The document analyses the regulatory framework for financial inclusion and the introduction of relevant public policies in 55 countries all over the world*, using 12 indicators** that measure regulations, public policies, supervisory systems, governmental capacity, infrastructure and economic stability, among others.

The Microscope first, presents the ranking of the countries analysed (0-100 points), together with data about how they have performed relative to 2014. The country with the top score this year is Peru (90 points), followed by Colombia (86 points) and the Philippines (81 points). It then goes on to give a general overview of financial inclusion world-wide, before focusing on the country-by-country breakdown.

Some of the most interesting conclusions at this global level:

(i) Financial inclusion across the world is experiencing a “slight positive drift”; favourable public policies have been adopted and existing ones are being applied with more rigour.

(ii)  Not enough attention has been paid to regulating the insurance market targeting low-income population groups, even though this is essential to achieve full financial inclusion.

(iii) The whole consumer protection is weak and insufficient attention is paid to over-indebtedness.

(iv)   Financial literacy has still not been tackled.

This document analyses the degree of financial inclusion existing in Peru and the main goals. It offers recommendations for guiding public policy and developing an appropriate legal framework for financial inclusion.

It identifies the following key challenges:

(i) Promoting access to the financial system

(ii) Designing financial products and services adapted to users’ needs

(iii) Introducing financial education programmes

(iv) Strengthening consumer protection mechanisms and procedures

(v) Promoting coordination across industries and between institutions

(vi)Promoting the leadership role of the central bank Banco de la Nación in financial inclusion

To this end, it recommends (i) improving infrastructures in order to increase geographic expansion and penetration,  (ii) developing and introducing alternative financial channels, such as mobile banking and banking correspondents, (iii) teaching financial education in all areas of the country and from a young age, as a key factor for inclusion, (iv) strengthening consumer protection through better regulation and financial education; (v) that the central bank, Banco de la Nación, play a more active part in promoting financial inclusion, leveraging its geographic reach and long experience.  

The World Bank has published its World Development Report 2016: Digital dividends.

Digital dividends are defined as the benefits arising from using digital technologies, it is to say, the economic growth, job creation and the provision of financial and non-financial services:

The report analyses the impact of the internet, mobile telephony and other related technologies on world development, warning that although they have spread very rapidly, the same cannot be said of digital dividends.

The document views universal access to the internet as a global priority, providing that there are other factors that need to be promoted, such as: (i) a regulatory framework that encourages the market while protecting consumers; (ii) technical skills that enable workers, business owners and public sector employees to leverage new technologies; and (iii) responsible institutions that use the internet to empower their citizens. These factors are defined as “analogue complements”.

The report concludes that universal connectivity remains a huge challenge and that the development of analogue complements is crucial to guaranteeing greater digital dividends: faster growth, more employment and better services.

After just one year of debate, the European Union has approved the Non-Financial Reporting Directive (2014/94/EU), which establishes the framework in which the member states must implement the non-financial reporting model for their large corporations in their respective countries. Approximately 6,000 companies are thought to be obliged to publish such information in their annual reports for 2016. For the first time, rather than requiring such disclosure under a corporate social responsibility regulation, it is made obligatory by amending the fourth and seventh accounting directives of the European Union.

The Directive consolidates the tendency to make the principal corporate social responsibility standards part of ordinary management reporting. They thus come to be included within the annual report on companies’ performance. The Directive will be applicable to all enterprises with over 500 workers, but not the subsidiaries whose earnings are consolidated upwards for reporting purposes.

It also establishes that companies must report on matters relating to the environmental impact of their activity, its effects on health and safety, greenhouse gases, use of renewable energy, water and air pollution, social policies and employee policies, equal opportunities, working conditions, respect for trade union rights, dialogue with local communities and actions to safeguard and develop them. It also mentions more general aspects, such as the protection of human rights and measures for preventing abuse, both of which had already been defined in specific regulations; relations with employees, customers, suppliers, etc.

Companies must explicitly describe the measures they adopt to fight against corruption and bribery, and the instruments they apply to avoid malpractices.

In connection with each of the points mentioned above, the information must include a brief description of the business model, the policies and controls applied; the results obtained; and the risks linked to proprietary trading, third-party trading, products and services of the company that may impact any of them. It must also describe the way in which the company is managing them and the specific non-financial indicators of the sector.

The Directive does not specify any particular format for reporting, but refers to national and international standards of financial reporting. The only condition is that the company must indicate which standard it is using. The European Commission has announced the publication of guidelines with key indicators to facilitate “pertinent, useful and comparable” dissemination of their non-financial results. Although they will not be obligatory, they should help companies draw up the information.  

Another aspect encouraging the modification of the accounting directives is the EU’s commitment to gender diversity in European enterprises. Regarding this specific issue, the Directive indicates that listed companies must report on their diversity policy, targets and results with respect to the governing, management and supervisory bodies, disclosing indicators such as age, sex, geographic origin, training and professional experience.

Under the comply or explain principle, widely used in corporate governance codes, if the company cannot reveal certain information, it must explain the reasons, envisaging a possibly adverse impact. Listed companies that do not have diversity policies may justify their lack of information in this area under this principle. This has made the transposition of the standard by EU member states more flexible.

When it comes into force at a national level, the company’s financial auditor must check that the information is included in the management report. When transposing the Directive, member states may establish the degree of external auditing that the information must receive.

The new Directive underlines the value of non-financial reporting and the value of intangible aspects, branding and reputation. These can provide an exceptional competitive advantage to the companies that wish to be on the cutting edge in the future.

This resolution modifies the regulations on credit and debit cards, on information transparency and contracts with financial-system users, and also Appendix 2 of Circular 184/2015: the Customer Care Circular, already reported in Progreso 5.

The Banking, Insurance & Pension-Fund Supervisor (Superintendencia de Banca, Seguros y AFP) approved the modifications to the Regulation for Credit and Debit Cards, as well as the change to the regulation on Information Transparency and contracts with financial system users, in order to further protect credit-card users and simplify procedures to make them easier to understand and better suited to their needs.

This resolution recognises the following user rights:

1. To decide how to apply payments to the credit-card account
2. To make partial prepayments
3. To ensure that the credit card payment is always applied to their debt.

The regulation sets out the order in which payments are to be applied. The first payment should be on the debt bearing the highest interest rate and continue down to the debt with the lowest interest rate. Nonetheless, users have the right to choose another way of applying the payment, if they so wish.

The resolution also makes provisions enabling users from now onwards to make partial upfront payments. In these cases the banking entity will have to employ the corresponding mechanisms for applying the payment to reducing the interest, fees and expenses due.

Finally, the regulation makes the proviso that any disbursement of sums equivalent to more than two upcoming payment instalments can be treated as a prepayment, meaning that the users, if they wish, may reduce either the sum of the remaining instalments in the same timeframe, or else the number of payments, with the corresponding reduction in the credit period.

The resolution passed into law on 10th February 2016 and gives banking institutions until 31st December 2016 to adapt to its provisions.

The Colombian government promotes collateral facilitation programmes through the National Guarantee Fund, the Fondo Nacional de Garantías S.A. (FNG), as part of its policy to facilitate the access to credit.

The FNG is in charge of facilitating access to credit to micro, small and medium entreprises , for which purpose it originates, handles, pays and recovers collateral. The FNG may guarantee a number of transaction types, for instance, microloans for operating expenses and/or capital expenses.

Current legislation stipulates that the financial entity may recover its collateral from the FNG after four (4) months of payment default. This draft circular proposes extending the minimum default period required for the collateral claims, from four to six (6) months.

This extension of the time limit has the aim of facilitating payment agreements and restructuring a arrangements as part of the push to bring microcredits into the mainstream.   

The modification will become law on 1st July 2016.

May be of your special interest:

• Banking institutions should offer preferential microcredits for  setting up small businesses (Colombia)
• Greater simplicity regarding the filing of real-estate collateral as a way of making it easier for small entrepreneurs  (Colombia)
• Modernizing the Secured Transactions System (Panamá)

In its next stage of creating a regulatory framework for Anti-Money Laundering, at the end of last year Panama’s banking watchdog, the Superintendencia de Bancos, issued Resolution SBP-GJD-0003/2015, applicable to regulated financial institutions (factoring and leasing companies, financial institutions, credit card processors, among others).

The Resolution lays down the procedure to be followed in inspections carried out by the banking watchdog as part of its supervisory function of verifying compliance with and effectiveness of control mechanisms against money laundering (AML) and related crimes, as well as risk-monitoring within each regulated institution.

Among the regulated aspects, The watchdog must issue a “Notice Letter” to each regulated institution, indicating the inspection date, the names of the supervisors assigned, as well as the breakdown of the information to be supplied. Similarly, regulated institutions will have to provide any other information that may be requested during the course of the inspection.

The importance of applying due diligence to customer information is stressed. Regulated institutions will have to store identification about their clients, records of their transactions, the payment systems used, how their businesses are monitored, etc.

Similarly, regulated institutions will have to make IT equipment available to the supervisors, which must comply with the specifications appended to the Resolution. Nevertheless, should it prove impossible to provide this equipment, the Superintendencia de Bancos will use its own.  

There are fines of up to USD 1 million for non-compliance, depending on the severity of the infringement, whether it is a repeat offence and the harm caused to others. The Resolution defines the following as non-compliance:

1.   Failure to provide information at the beginning of the inspection;
2.   Failure to provide additional information on the date and in the manner established during the course of the inspection;
3.   Provision of incomplete, erroneous or inconsistent information affecting the overall quality of the same.

For financial regulated institutions it is helpful to have clarity about the inspections that will be carried out to analyse Anti-Money Laundering (AML) checks, since it will allow them to adapt their internal structures to the new Anti-Money Laundering law.

On 18th February 2016, FATF announced that Panama had been taken off its grey list. This is the consequence of an integrated AML reform, which establishes new parameters and has extended its reach to previously unregulated institutions, including professionals such as accountants, lawyers, notaries and similar.

The Code of Corporate Governance for Finnish listed companies was reviewed and reorganised in October 2015 as a result of the legislation passed in April 2014 by the European Commission in the area of corporate governance, which strengthened both the comply or explain principle and the quality of the explanations that companies must report to the market.

The reform aims to retain and further promote the application of high standards of corporate governance by companies listed on the Helsinki Stock Exchange, making their practices and procedures comparable to those of other companies internationally.

The number of recommendations has been reduced from those in the earlier version of the Code (2010). This has largely been effected by bringing together all the information reporting requirements in a single chapter, promoting better content of the information that companies report, thus encouraging greater market transparency.

The new code is divided into six chapters: Annual General Meeting; Board of Directors; Board Committees; Remuneration; other corporate governance issues; and Information & Reporting. It also includes an introductory chapter with general information about the corporate governance framework in Finland, in response to the information needs of companies, investors and other stakeholders.

The key modifications to the Code include the following:

• Composition of the Board of Directors: companies must publish the procedure followed when deciding the make-up of the Board of Directors.
• Diversity policy: companies must define the diversity policy they apply to members of the board and, specifically, report on their gender diversity policy and measures they are taking to ensure equal representation.
• Independence: the time after which a member can be considered independent has been cut from 12 to 10 years and a provision included pursuant to which firms must assess their board members’ independence at least once a year.
• Related-party transactions: entities will have to report on the procedures put in place to approve transactions with related parties in order to ensure appropriate decision making and to avoid potential conflicts of interest.
• Audit Committee: the levels of knowledge and expertise in the subject required of the committee members has been raised, and the obligation that they all be independent has been reinforced.

This Code of Corporate Governance became law on 1st January 2016. Since then, companies have been required to report on their compliance with the Code’s guidelines on their websites and in their annual corporate governance report.

Other countries around the world, such as Spain and Poland in Europe, and Colombia, Ethiopia, Japan and Peru elsewhere, have also recently published their corporate governance codes, all with the aim of encouraging listed companies to follow clearcut principles of market transparency and ensuring proper dissemination and circulation of information.  

Similarly, last September, the Organization for Economic Cooperation and Development (OECD) published an updated version of its Corporate Governance Principles (last revised in 2004), defending good governance as an acknowledged driver of growth and inclusive development.

This Circular on supervision and solvency came into force on 10th February, approved by the Bank of Spain as the final tranche of the adaptation of Spain’s legal framework to the European regulation generated by the Basel III agreement.

The Circular has nine chapters, containing innovations such as the introduction of additional permanent regulatory options for the Bank of Spain, the implementing standards on capital buffer requirements and the regulations applicable to the differential treatment accorded to certain risk categories. It also sets forth the statutory regimes applicable to bank branches and to free service provision in Spain and to credit entities headquartered in non-EU member states. In addition, certain aspects of the additional supervision applicable to financial holdings have now been regulated.  

With regard to the information about the supervision and solvency of credit institutions, chapters 4 and 8 are particularly important, addressing key issues of corporate governance such as new provisions for the internal organisation of institutions and remunerations policy. They also set out the regulations on transparency and requirements to inform the market.

Chapter 4, internal organisation, regulates areas that were introduced in Act 10/2014 on organisation and supervision and Royal Decree 84/2015 with measures implementing the Act. It determinates thus that institutions will have to create an Appointments Committee and a Remunerations Committee, which may be one single Committee in the case of those institutions with a total asset volume in their own right of less than EUR 10 million at the close of the two preceding financial years.

The legislation requires institutions to have a dedicated risk management unit or organ. Entities must therefore create a risks committee or, in the case of those with a total asset volume in their own right of less than EUR 10 million at the close of the two preceding financial years, their audit committee may take on the risk management role.

In any event, all the committees cited must comprise at least three non-executive members, while at least a third of these must be independent, including the chairperson.

Furthermore, entities must have regulatory compliance and internal audit departments and should define robust and appropriate procedures for fulfilling these functions.

The chapter also defines the suitability and evaluation requirements for board members, CEOs and similar posts in credit institutions and financial holding companies, both mixed and otherwise. To this end, institutions and companies must apply specific and appropriate internal procedures for the selection and continuous assessment of these positions. In all cases they should ensure that their members have recognised commercial and professional probity, together with the necessary know-how and experience to carry out their roles. Furthermore, in the case of board members, they are to ensure that they behave honourably, with integrity and independent criteria, such that they are in a position to exercise good governance.

As a novelty, all this information must be disclosed to the relevant authorities, which will assess, before the member is included in the Senior Officers’ Register, whether the suitability requirements for the position have been satisfied.

Finally, there is a section in the Circular covering remuneration for board members, senior management and employees whose professional activities have a significant impact on the entity’s risk profile, according to the criteria laid down in articles 3 and 4 of the Delegated regulation (EU) 604/2014. Regulations 37 and 39 of this section set the specifications for institutions’ remuneration policy, and establish their obligation to carry out an annual internal assessment of the policy and to report it to the relevant authority.   

Chapter 8 gives the market disclosure requirements incumbent on credit institutions, specifically with regard to the information their websites must include regarding corporate governance and their remuneration policy. This information must be comprehensive, clear, comparable and up to date, as well as accessible from the website’s homepage in a section titled “Corporate governance and remunerations policy”. The contents should be structured and hierarchical; headings should be clear, concise and meaningful; the tone should be appropriate, avoiding as far as possible the use of industry jargon and abbreviations.

Entities will have three months grace in which to publish this information on their websites, as specified in the Circular’s Seventh Transitional Provision.

IFC has published a document analysing the impact of gender diversity on the economic performance of companies in Jordan. It points out that despite the large number of women in Jordanian society, they continue to be significantly under-represented in boardrooms and therefore provide little input when important decisions for companies are made.  

The research aims to demonstrate the value of having women on these boards and in senior-management positions, and flags up some of the challenges facing women today if they want to occupy decision-making posts. It also makes some recommendations as to how to overcome these obstacles.

You might also be interested in Ahmed Attiga’s article, “Women are key for corporate success”. 

The consulting firm Russell Reynolds Associates has published a report containing the responses to the large-scale survey carried out on executives working in public and private sector firms in the US, Brazil, the European Union, Japan and India. When asked “What corporate governance trends do you think we will see in 2016?” interviewees came up with the following ideas:

• An approach based on the effectiveness of the board of directors, with particular emphasis on its composition, diversity and independence of its members
• Focus on the individual actions and performance of each board member, and regular assessments of the Board of Directors’ activity
• Stronger regulation, review of corporate governance codes and publication of rules on information disclosure by companies in order to promote transparency
• Greater commitment of shareholders, and a greater focus on corporate social responsibility

This document presents a study into customers’ level of satisfaction with the products and services offered by four microfinance institutions in Peru*. It forms part of the “Voice of the Client” project, an initiative from the Hivos and MIX organisations to make customers’ voices heard.

Five indicators were selected from the Smart Campaign Customer Protection Principles to evaluate the customers’ satisfaction. They were: (i) suitable product design (ii) prevention of over-borrowing, (iii) transparency, (iv) fair, respectful customer treatment and (v) complaint resolution mechanisms.

The surveys reflected that the majority of customers (88%) are generally satisfied with their institution. However, it recommends further investigation into the causes of over-borrowing, the degree to which customers really understand the cost of borrowing, and more dissemination of the complaint resolution channels.     

The document highlights the main findings of the Women, business and the Law 2016: Getting to equal report, which analyses a total of 173 economies as to how legal barriers affect women’s ability and desire to access the world of work or become entrepreneurs.

The results of the latest report, which has been published every two years since 2009, conclude that:

• Legal differences are latent in the vast majority of countries: in 155 of the 173 economies researched, there is at least one law that prevents women from having economic opportunities;
• In 46 of them, there are no laws to protect women from gender violence;
• Furthermore, in 18 economies there are still laws that allow husbands to stop their wives from working;
• Greater legal inequality is the reason why fewer girls go on to secondary education, fewer women work or start a business, and why there is a greater wage gap.

Sarah Iqbal, lead author of the report, commented on the results: “Although laws cannot guarantee equal treatment for women, they are the first steps in creating a level playing field in which all women are given the opportunity to flourish.”

PwC’s annual report presents the key findings of the survey carried out with 783 board members of companies listed in the US (more than 74% with billings of more than EUR 1 billion) in the banking, insurance, energy and industrial products sectors, 86% of whom are men, and the remaining 14% women.

The aim is to reveal current trends, practices, concerns and viewpoints in company boards and to tackle increasingly important issues such as correct decision taking, diversity, the composition of the board, risk management, board member remuneration and their roles and duties.

The results can be organised into several key areas:

• Diversity: members with experience in the financial sector, in the firm’s sector, in operations and in risk management; expertise and commitment to the position; CEO and members’ succession planning. Diversity (knowhow, experience, age, training, etc) is considered a key element for 95% of survey respondents, but there are great discrepancies between men and women about the importance of gender diversity.
• Communication with investors and shareholders: practices and protocols for greater dialogue with them; systematic and regular communication.
• Board priorities: strategy; training programmes; succession planning for the CEO, mitigation of IT risks; talent management.
• Strategy: abandoning short-termism in favour of a long-term vision; strategic debates in sessions (analysis of the competition, need for external advice, also geopolitical, environmental, technological issues, etc); talent management as a key element; risk management (risks of fraud: anti-corruption programmes, ethical codes, models for preventing and detecting crime, etc); internal auditing (independence, objectivity, scope, technological support and a culture of service to the company).
• Supervision of IT strategy: greater involvement in IT projects, recognising that issues such as big data, analytics and social media are essential on strategic agendas.

For ten years the Global Gender Gap Report has been analysing gender gaps worldwide in four key areas: health, education, political representation and economic opportunity. This year’s report indicates that the gap has narrowed in economic terms by 3%, although in terms of equal pay and parity in the labour market, progress has stalled since 2010.

The results show that although not one single country has completely closed the gender gap, the Scandinavian countries are closest to doing so, with Iceland, Norway, Finland and Sweden scoring best.

The methods used in this document are based on the Global Gender Gap Index, which classifies 145 countries by the gap between men and women in terms of health, education, economy and political indicators, to determine whether countries are sharing their resources and opportunities fairly.

Paloma del Val

The other day, an interview with a well-known executive of a hotel chain caught my eye in the Latin-American press.  When asked which corporate social responsibility standards were applied in his company, he firmly replied: “Pursuance of good corporate governance”.

One might think that this professional knew his business but could not distinguish between corporate responsibility and corporate governance. However, I will argue that his statement, far from displaying confused thinking, makes enormous sense coming from someone with proven success in managing a large company.

The interview triggering these thoughts is intended to demarcate the roles of good corporate governance and corporate social responsibility in companies and in other kinds of organisations subject to lesser regulation (public administration entities, non-profits, etc).

In its origins, corporate governance was shaped through standards and codes, and its recommendations dealt solely with the functions of the governing bodies of companies, information models and reporting lines, and supervision mechanisms limited to the protection of shareholders.

This changed when the crisis ensuing from the Enron scam in 2001 led corporate governance to focus more on the quality of audits. Then, from 2008, the crisis triggered by Lehman Brothers’ collapse led to a review of the veracity of agency ratings. Since then, we have witnessed an outpouring of codes, guidelines and standards promoted by all kinds of institutions. This proliferation continues in the industrialised economies and it spreads like an oil spill to developing countries.

Thus, corporate governance has evolved from being a means to ensure due protection of shareholders to become a way of protecting stakeholders in general. Today’s good governance is concerned with ethics, transparency, long-term sustainability and social commitment.

The rules of governance have given way to an architecture of relationships connecting all actors with any stake in how companies operate: markets, funders, regulators, employees, suppliers, customers, environmentalists, local communities, etc.

Good governance is configured by three layers of relationships, stretching from the outside into the inside of organisations. The three levels are equally important, interact with one another, and complement and influence each other. They are: first, external regulation and markets; second, the highest supervisory body (board of directors, board of trustees and similar); and finally, the corporate governance infrastructure within the institution.

Markets and external regulation influence organisations’ model of governance to protect direct or indirect stakeholders. In principle, markets reward organisations able to offer quality products and services meeting customers’ demands and punish those failing to do so. And increasingly, customers and other players with a stake in the markets, in addition to such product and service attributes, value social or environmental dimensions, such as fair trade or organic products.

In this level of external regulation there is also the public administration, where the government issues norms and regulatory standards for industries, sectors and different categories of organisation. Regulators and supervisors work to ensure that markets are stable and efficient and to protect consumer rights. Legislation is enacted to ensure legality and fairness in institutional decisions. Meanwhile, capital markets and rating agencies require and create transparency and stimulate competition. This is also the level at which external auditors validate the performance indicators being reported to the outside world.

The second layer of corporate governance concerns organisations’ highest supervisory bodies. These must safeguard companies’ strategic direction and their model for linking the different functional units within a structure and their impact will depend on the nature of the decisions adopted.

The set of all the functional units most directly affected by the resolutions passed by the senior supervisory body come together to form the third level of governance, which we can call the infrastructure of corporate governance. The main function of this infrastructure is to operate inside the organisation, to mitigate the risks generated by their activities, by establishing efficient procedures, mobilizing resources, and generating reputation from its financial and non-financial performance, through the control of operating, legal, technological, social, environmental and other risks.

It has been estimated that from 1970 to year-end 2010, tangible assets only account for 20% of enterprises’ total value. The remaining 80% comes from intangible assets. This transformation in the fundamentals of value explains why corporate governance must focus on non-financial issues. Good governance should preserve 100% of an organisation’s worth. And that 80% of intangible assets is where good practices can be found: respect for workers, (training, gender diversity, integration of the differently abled, health and welfare), respect for the environment (efficient use of resources, reduction of waste, pollution mitigation), respect for ethical management (fighting fraud and corruption), respect for customers (transparency, clarity of information), etc.

The European Union Green Paper made the first attempt to define corporate social responsibility (CSR), making it clear that social responsibility does not simply mean full compliance with legal obligations. It encouraged companies to take their responsibilities further, investing in human capital, in their surroundings and in establishing relations with their stakeholders.

Corporate social responsibility was also defined as companies voluntarily coming up with solutions to social and environmental concerns, and voluntarily establishing ethical relationships with their customers and suppliers.

More recent regulatory developments, institutional recommendations, markets and, in general, those operating in the external layer of corporate governance have promoted the inclusion of much of the content of social responsibility into habitual management processes. Some have incorporated responsibility policies merely because they were mandatory, but others have voluntarily accepted that they make sense in order to generate reputational gains and the highest possible intangible worth.

A third factor that has encouraged the integration of social responsibility models into organisations’ strategy has been how hard it is to find indicators and metrics to measure the actual impact of social responsibility policies. Many companies have thus considered that the most efficient way of capturing the value generated by CSR activities is simply to incorporate them into habitual management policies.

The growth in business regulation, media pressure on companies to commit to the societies in which they operate and increasing demands from markets and investors have generated a new status quo, where the sources of non-financial impact become blurred. Is it corporate governance or corporate social responsibility? It is no longer clear.

The absorption of CSR content into good governance is a work in progress and we can expect it to continue. On 29^th September, the European Council passed the Directive on Non-Financial Reporting. This is clearly one such consequence as the process continues to expand.

The directive will require organisations to report on the policies they have regarding their impact on the environment, their measures to ensure respect for human rights, their procedures to fight corruption and malpractice, their human resources management models (gender diversity, equal opportunities, working conditions), among others. From now on, these and other such policies must be described in the companies’ annual financial reports or in a specific report on corporate social responsibility. The directive also requires them to publicly disclose what tools and indicators must be used to monitor their evolution in these areas.

Regulators, governments, markets and public opinion are fully aware that financial earnings are insufficient grounds on which to make investment decisions. On their own, they are not enough to boost brand recognition, to attract talent or to encourage confidence in the company’s long-term value creation. The scope of duties for the highest supervisory bodies within institutions is becoming ever greater. Boards are expected to direct their organisations in their function of key drivers of transformation of society over time. They must enable their enterprises to take on an ever more essential role in tackling current economic, social and environmental challenges, while ensuring the regeneration of inclusive and balanced economic development.

With these ideas in mind, the BBVA Microfinance Foundation has recently adopted a modern governance model that is shared by all the financial institutions in which we hold an interest. Our new Corporate Governance Code establishes a single model of management and relations for all. The aim is to deepen our commitment to generating an inclusive social impact that is sustainable over the long-term and to create value and reputation.

As a foundation, we and those working with us must meet the most exacting standards of good governance, exclusively guided by a commitment to society and to our founding principles. For non-profit entities, financial earnings do not need to be our top priority, which is why we must recognise the special importance of the social impact of our business and our generation of intangible value. Such goals are only possible under business models that have fully incorporated the best standards of corporate social responsibility into the heart of their corporate governance.

As the CEO of the hotel chain said in his interview, the best corporate social responsibility standard is the best corporate governance.

The report analyses the process of accessing the financial system, what it calls “linkage activity”, by village savings and loan associations (VSLAs) through financial service providers (Banks, microfinance institutions, mobile telcos, cooperatives, etc).

It studies in which countries such linkage exists, what kind of organisations participate and what products they offer. It emphasises the enormous potential such associations have to boost savings. Once the associations link them into the financial system, their members increase their average savings by between 40% and 100%, and approximately 13% of them are subsequently able to open an individual savings account.

The report identifies 106 active savings associations, linked to 95 formal financial institutions in 27 countries world-wide. 65% of these are in Sub-Saharan Africa, 29% in Asia Pacific and 6% in Latin America*.

* Mexico, Dominican Republic and Colombia