By Klarissa Artavia, MAIT 2025. INSight Student Magazine.

In recent years, Costa Rica has witnessed significant changes in its financial regulatory framework, with the stated objective of protecting consumers and guaranteeing the stability of the economic system. The implementation of the Usury Rate Law and the regulations established by the Superintendencia General de Entidades Financieras (SUGEF) represented considerable progress towards these ends. However, despite the good intentions behind these measures, side effects have emerged that have disproportionately impacted the most vulnerable segments of society, revealing a painful paradox at the heart of these reforms.

Initially, the financial reforms brought palpable improvements for those at the bottom of the income ladder among financially stable consumers, whom we might refer to as the "poorest of the richest". This group experienced a reduction in interest rates on credit cards and personal loans, a direct result of the Usury Rates Act. Improved clarity and transparency in credit offers also increased confidence in the financial system, thus stimulating demand for loans and improving access to credit for this specific group.

The consolidation of the credit card market, focused on more popular and profitable options, simplified the choice for consumers, allowing them to benefit from more competitive financial products. These improvements represent a move toward a fairer and more accessible financial system for those who, although not at the top of the economic ladder, have access to basic financial resources.

However, the imposition of interest rate caps and the reduction in the diversity of financial products available have had adverse consequences for the poorest of the poor. The reduction in the maximum term for credit union loans, coupled with a limited supply of credit card types, has severely restricted access to credit for those with higher risk profiles or no credit history (MEIC, 2023).

This trend towards consolidation can be interpreted as an additional barrier for individuals in the lower strata, who, often excluded from the formal financial system, are pushed towards informal financing options with much less favorable conditions.

The financial exclusion of these vulnerable sectors has significant consequences, not only for the individuals affected, but also for the country's economic and social development. Thus, as the banking system adjusts its policies to comply with new regulations, a significant number of people, especially those traditionally excluded from the formal financial system, find themselves facing greater difficulties in accessing affordable and fair credit. This exclusion has indirectly fostered an increased reliance on informal lending, in particular drop-by-drop lending, which is notoriously aggressive and exploitative.

The reliance on informal lending services reflects the financial desperation of the poorest and the failure of the system to provide safe and accessible alternatives. These options, marked by abusive interest rates and aggressive collection practices, not only perpetuate a cycle of indebtedness and vulnerability, but also limit the ability of these individuals to invest in vital areas such as education and entrepreneurship.

The gota a gota lending situation in Costa Rica reflects an alarming expansion of this practice, spreading throughout the country and gaining ground in almost every neighborhood. This reality not only highlights a weakness in the banking system but also a critical lack of accessible microcredit options for those in need.

While in other countries microcredits have flourished, offering low interest rates and supporting entrepreneurs and basic productive units, in Costa Rica access to these resources is still limited and, in many cases, more expensive than traditional credit.

The need to explore greater measures for banking penetration and the promotion of microcredits for small productive units is evident. True financial inclusion in Costa Rica must go beyond adjusting interest rates and payment terms, and seek to create an environment in which the most vulnerable people can access soft loans that suit their capacities and needs.

This implies not only a modification of the regulatory environment but also a genuine willingness on the part of financial institutions to offer real solutions to those who need them most.

The current situation of gota a gota lending in Costa Rica is a clear indication of the urgency of this task. The proliferation of these exploitative loans reflects not only a gap in the supply of formal and accessible credit but also the desperation of those who, excluded from the banking system, are forced to resort to options that plunge them further into vulnerability and poverty. The reform of the usury rate law, although based on a positive intention, must be complemented with policies that effectively promote financial inclusion and combat dehumanizing lending practices, ensuring that the financial system is inclusive and fair for all Costa Ricans.

Faced with this situation, it is imperative to seek solutions that not only protect consumers from unfair financial practices, but also ensure effective financial inclusion. This implies reconsidering current policies and regulations to ensure that, while combating usury, the most needy are not excluded from the formal financial system. The development and implementation of financial products tailored to the needs of the poorest, along with the strengthening of financial education programs, are crucial steps towards an inclusive solution.

Financial institutions and government should collaborate to create a regulatory framework that encourages innovation in inclusive financial products. This could include incentives for institutions that offer affordable credit solutions for the poorest and a regulatory approach that facilitates access to credit for all segments of society.

To transform this reality, it is crucial that financial institutions and government work hand in hand to drive innovation in inclusive financial products. This involves not only offering microcredit at reasonable interest rates but also ensuring that these services are designed to be accessible and understandable to all. Banking the traditionally excluded and fostering an enabling environment for microcredit are fundamental steps towards true financial inclusion.

This task is not just a matter of financial justice; it is a moral and economic imperative. A financial system that leaves behind those most in need is a system that fails in its most basic purpose: to serve as an engine of progress and well-being for all of society. History has shown us that when people are given the opportunity to get ahead, through soft and accessible credit, not only they benefit, but the entire community.

This is the only way to ensure that the benefits of the financial system reach all citizens, without sacrificing the most needy on the altar of consumer protection. Ensuring equitable access to credit for all Costa Ricans is fundamental to achieving true financial stability and socioeconomic development.