14ymedio, Havana, November 24, 2023 — The balance sheet for bancarización* (banking reform) four months after its implementation, is not optimistic: The micro, small and medium-sized enterprises (MSMEs) are increasingly suspicious of electronic payment methods and continue to “retain cash.” The shortage of banknotes is still at its peak, and the Island’s banks are suffering a growing stampede of their staff. These are some of the conclusions that emerge from the appearance this Thursday on State TV’s Roundtable program of the minds behind this process.
“Every day more cashiers leave,” said the Minister-President of the Central Bank of Cuba (BCC), Joaquín Alonso Vázquez. Without attributing it to emigration – outside the Island or to other jobs – the leader explained that the lack of workers was a hard blow to bank reform, because it affects the key point for the circulation and control of the money.
It was useless, Alonso said, to raise the salaries of employees, who were also paid “for good results.”
Escorted by the general director of Payment Systems of the BCC, Julio Pérez Álvarez, and by the vice president, Alberto Quiñones, Alonso focused his talk on celebrating that Cuba has “advanced towards bancarización,” despite the fact that it did not have “strong investments in technological equipment” nor enough “point-of-sale terminals.” Condemned to work with old equipment – “because we are hindered from accessing new technologies,” he said, alluding to the U.S. embargo – the BCC had a single resource available: “innovation.”
The official assured that “all actors in the economy now have full access to banking services – an element that differentiates us from other nations,” he said proudly, but the MSMEs continue to have multiple reservations and prefer to manage their operations in cash.
Cuba has no choice but bancarización, Alonso said, because making paper money is an expensive process, and Cuba does not have the resources for this. “Using banknotes means importing the paper, the inks and maintaining the equipment. After they are issued you have to transport them, distribute them, count them, and after 10 or so uses they deteriorate. Then you have to destroy the banknotes and produce them again. It is a permanent cost in all banking operations, and it requires a large workforce, equipment and energy consumption,” he explained.
With the growth of the private sector, there is more money in circulation, and “more economic actors involve a greater number of people who go to the bank to deposit and withdraw cash
In addition, with the growth of the private sector, there is more money in circulation, and “more economic actors involve a greater number of people who go to the bank to deposit and withdraw cash.”
The BCC also warned of an important “distortion”: with inflation, private individuals are raising pay for their workers – and therefore demanding more cash – while the state sector continues to pay the same, including to the bank employees themselves. This situation, already serious in Havana, precipitates the resignation of workers, for whom the meager “wage boost” that the BCC can afford is insufficient.
The numbers, the manager alleged, give him some hope about the future of banking. Since the pandemic, electronic transactions tended to increase naturally in Cuba. However, in 2023 – when inflation got out of control – the use by Cubans of electronic platforms declined by 78%. That decline forced the BCC to act; hence, they launched an “acceleration” of the measure in August.
However, “the cash that remains outside the bank continues to grow, and it is a harmful phenomenon for the economy, because it affects price growth,” Alonso said. He criticized the MSMEs that retain cash “not always for lawful needs” but to use it for the purchase and sale of foreign currency, “which the State cannot offer.”
However, “the cash that remains outside the bank continues to grow, and it is a harmful phenomenon for the economy, because it affects price growth,” Alonso said. He criticized the MSMEs that retain cash “not always for lawful needs” but to use it for the purchase and sale of foreign currency, “which the State cannot offer.”
Without cash in the banks, Alonso warned, there will be no loans to “leverage” the private sector either. The best thing, he said, “is to deposit the money in the accounts” and trust that the BCC does not monitor anyone and has as an “inalienable principle” not to violate “bank secrecy.”
Private individuals should view the bank as their “main ally,” added Julio Pérez Álvarez, although his colleague, Quiñones, acknowledged that the BCC itself is responsible for several deficiencies. It failed, according to the vice president, in “awareness, communication, approach to customers, entities and organizations.” In many branches, employees did not know how to explain the process and made the operation complicated.
So far, bancarización works in an acceptable way only in Havana, Matanzas, Villa Clara, Holguín and Santiago. In the other provinces – and in the countryside – it is still a pending matter. To give a glimpse of the situation, Escambray interviewed 765 readers in Sancti Spíritus. To the question of whether the MSMEs “have accepted” bancarización, only 7% answered yes, 35% answered no, and 59% admitted that some businesses do, but most did not.
*Translator’s note: “Bancarización” is a term used to describe banking reform in Cuba and other Latin American countries. All economic transactions would be made by debit card, including cash withdrawals and the payment of salaries. The term does not have a counterpart in English so the Spanish term is used throughout this translation.
Translated by Regina Anavy
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