Santo Domingo – Between 2004 and 2023, the annual average growth in the banking sector’s deposits was 14%. As a result, the savings ratio over the gross domestic product (a measure used to assess the banking sector’s depth or size in relation to the economy) jumped from 26% to 35% during that said period, according to the Dominican Republic’s Association of Multiple Banks (ABA).
Despite the return of the pre-2003 macroeconomic crisis savings levels by December 2023, the ABA highlighted the indicator is still quite “Shallow compared to the Latin American average, with a deposit-to-GDP ratio of 52.3%“.
The ABA clarified the concept of a nation’s ‘financial depth’ by explaining it as the correlation between deposits and GDP, adding “As savings increase, the financial system becomes ‘deeper’, meaning more resources are available at lower costs for firms and households to execute their investment and consumption projects“.
During World Savings Day on October 31, the ABA pointed out the critical importance of continuous savings growth for the Dominican Republic’s economic and social development, stating, “Greater financial inclusion, economic growth, and poverty reduction are typically linked with countries with deeper savings bases“.
Using this information, the banking union stressed the “Importance of intensifying efforts to foster a greater culture of saving to enable more investment capacity or gross capital formation in the country, serving as a sustainable development tool and reducing dependence on external financing“, for both the medium and long-term prospects.
Boost in savings for the first three quarters driven by time deposits
The Association of Banks announced that public deposits in the banking sector saw a rise of RD$167.2 billion compared to December 2023, a growth of 8%, resulting in a total of 2 trillion 268,687 million pesos by September of the ongoing year.
The ABA mentioned that the growth in savings during the first nine months came from an increase of RD$143.9 billion in time deposits, RD$18.5 billion in demand deposits, and RD$4.8 billion in savings accounts, based on data provided by the Banks’ Superintendency.
In terms of the savings accounts distribution, men own 51%, and women own 49%. Women hold a slight advantage of 1 to 3 percentage points over men in provinces such as Santo Domingo, Puerto Plata, Duarte, and San Cristóbal, according to an analysis by the Technical Directorate of the union.
Five districts contribute to 91% of the Dominican Republic’s savings
As per a press document, the Association of Banks highlighted that the district with the highest deposit percentage is the National District, 62.7%, followed by Santo Domingo at 11.6%, Santiago at 11.3%, La Altagracia at 3.4%, and La Vega at 2.4%. These areas account for 91.4% of all registered bank deposits as of September this year.
The National District and the four provinces mentioned concentrate 70% of the 8.8 million deposit instruments managed by multiple banks nationwide, as per the Banks’ Superintendency statistics.
The banking union views these provinces as fund generators that the banking sector then redirects within their area and to provinces that seek credit, where their financing demands exceed their deposit generation.
Finally, the ABA supports the promotion of a savings culture from a young age to help alleviate poverty and enhance population’s financial literacy. They further emphasized that a high saving rate during economic crises, like the one experienced due to the COVID-19 pandemic, could help mitigate unfavorable impacts facilitating a quicker economic recovery.
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