Colombia’s banking sector has been one of a few national players, and a credit structure burdened by faulty loans and an uncertain image internationally. After the economic debacle of the late 1990s, in which the Pastrana government had to step in with a controversial 4 x 1,000 transfer tax to pump much needed liquidity into retail banking, the “democratic security” objectives of the Uribe government began to generate renewed confidence in the country, especially with foreign investors. Colombian banks, which control 80 percent of the gross national patrimony are now facing increased interest and competition from outside.

As the preferred country in the region for foreign banks looking to expand, many have entered into talks with the Superintendencia Financiera over the past few years to establish a national business, including Brazil’s Itaú and GNB Surameris. The presence of Spanish banking giant BBVA and HSBC following in the path of Citibank shows how much more secure the investment climate is now in Colombia.

As a country opening up for new international players, Colombia already hosts important European and North American banks such as RBS (Scotland), Scotia Bank (Canada), Helm Bank (U.S.) and Corbanca (Chile). Colombia’s proximity to Panama and Brazil is also playing an increasingly important role in driving regional banking integration, as both countries have a long-standing tradition of being a safe bet for global equity.

With the government following a security agenda, Juan Manuel Santos has committed his administration to not increase taxes, strengthen relations with Venezuela and open up Colombia to investment opportunities from Panama and Korea. “We want to attract foreign investment by having a middle class with greater comsumer potential,” remarked Santos in an interview with La República newspaper.

Expanding the banking capacity of lower and middle class Colombians has also been a priority of the new government. Close to 18 million Colombians now own some financial product, with many women leading the way. During the last year, another 1.4 million joined the ranks of banking clients. The financial product that has seen the greatest growth are savings accounts. In Colombia, women lead when it comes to putting money in the bank. Out of every 10 women, 6.2 have a financial track record, compared to 5.9 for men.

Despite the increased confidence by consumers in retail banking, personal accounts – including term deposits (CDT) – only make up for 30 percent of the gross domestic product. Although Colombians are increasingly becoming part of a banking community, high interest rates continue to exclude many from saving and establishing a good credit rating. While previous administrations have cleared the list of millions reported to risk agencies and who found them- selves excluded from any kind of credit due to circumstances going back as far as the economic crisis of 1993-2000, Colombians still remain weary, if not skeptical, of the benefits of signing on to a national bank. Breaking the perception that banks are ‘after your money’ is one of the challenges foreign banks must face if thinking retail in this country.

While foreign banks see a growing market in Colombia and a consumer base eager for transaction services such as online banking (potentially saving hours lining up in queues), the revaluation of the Colombian peso against the dollar continues to attract many to exchange houses and the possibility of liquid U.S. funds. Colombia’s central bank, the Banco de la República, tries to halt the continuing fall of the greenback against the peso by buying dollars in what is seen by many as just a temporary measure to help exporters, especially one of this country’s most hard-hit: flower growers. Despite “buying” sprees by the state bank, Banco de La República, the official rate has remained near the $1,800 pesos mark to the dollar during the last financial quarter.

While access to “cheap” dollars have hurt exporters, it has benefited ordinary Colombians who can afford to travel overseas and buy imported goods at a better price. Colombians now see the potential in having a bank account, rather than keeping cash under the mattress. It’s a market ready to embrace competition and ultimately has provide a better service.