Costa Rica - Financial Sector Assessment Program - Technical Note - State’s Role in Financial Sector

Jul 19, 2026

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Technical note from the World Bank Group analyzing the State’s role in Costa Rica’s financial sector under the Financial Sector Assessment Program (FSAP). It traces the historical evolution of state banking footprint, reviews functional and financial performance aspects, and assesses how regulatory and competitive distortions influence public financial institutions. The note evaluates the System for Development Banking (SBD) and Banco Popular, examines forward-looking constraints and recommendations, and frames policy options to enhance development impact and support continuous market liberalization.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages31

Reading Time1 h 18 min

Executive Summary

Introduction

Functional Assessment

Financial and Economic Performance

Sistema Banca para el Desarrollo (SBD)

Banco Popular

Operational Environment

Forward View and Recommendations

Competitive asymmetries

Sistema Banca de Desarrollo

State ownership of two largest banks in the system and INS

Annex

Public Disc losure Authorized THE WORLD BANK GROUP COSTA RICA FINANCIAL SECTOR ASSESSMENT PROGRAM September 2022 TECHNICAL NOTE STATE’S ROLE IN FINANCIAL SECTOR Pub lic Disc losure Authorized Prepared By Finance, Competitiveness, and Innovation Global Practice, WBG This Technical Note was prepared by Marius Vismantas and Faruk Miguel Liriano in the context of a World Bank Financial Sector Assessment Program (FSAP) mission to Costa Rica during June 29 – July 14, 2022, led by Mariano Cortes and Oliver Masetti. CONTENTS Executive Summary_______________________________________________________________________________ 4 Introduction ______________________________________________________________________________________ 8 Functional Assessment ___________________________________________________________________________ 9 Financial and Economic Performance ___________________________________________________________ 10 Sistema Banca para el Desarrollo _____________________________________________________________ 10 Banco Popular________________________________________________________________________________ 18 Operational Environment________________________________________________________________________ 21 Forward View and Recommendations ___________________________________________________________ 23 Competitive asymmetries_____________________________________________________________________ 23 Sistema Banca de Desarrollo__________________________________________________________________ 24 Banco Popular________________________________________________________________________________ 24 State ownership of two largest banks in the system and INS _________________________________ 25 Annex ___________________________________________________________________________________________ 27 Tables and Figures Table 1: Financial sector structure________________________________________________________________ 8 Table 2: Competitive asymmetries_______________________________________________________________ 22 Figure 1: Utilization of SBD funds________________________________________________________________ 12 Figure 2-SBD credit portfolio, average interest rate, credit size and credit allocation___________ 14 Figure 3-SBD credit portfolio by firm size, gender, and currency _______________________________ 15 Figure 4-SBD and SFN credit portfolio – sectoral breakdown __________________________________ 16 Figure 5 – Percentage of financial inclusion _____________________________________________________ 17 Figure 6 – Banco Popular, credit share and growth ______________________________________________ 19 Figure 7 – Banco Popular – Assets and liabilities decomposition ________________________________ 20 GLOSSARY BANVHI Banco Hipotecario de la Vivienda BP Banco Popular y de Desarrollo Comunal CBA Cost-benefit analysis CREDES Créditos de Desarrollo INS National Insurance Institute FCD Fondo de Crédito para el Desarrollo FOFIDE Fondo de Financiamiento para el Desarrollo FONADE Fondo Nacional para el Desarrollo GAM Gran Área Metropolitana MSMEs Micro, small, and medium enterprises SBD Sistema Banca para el Desarrollo SFN Sistema Financiero Nacional SOBs State-owned commercial banks EXECUTIVE SUMMARY 1. The history of the state’s footprint in Costa Rica’s financial sector goes back a longtime, with sector liberalization being a fairly recent phenomenon. Banco de Costa Rica, the first state owned bank was established in 1877. Banco Nacional de Costa Rica and Instituto Nacional de Seguros were established in 1914 and 1922, respectively. For many decades since their establishment these financial institutions had monopoly powers in their sectors, supporting an economy dominated by the state. State banking monopoly ended in 1995 when private and foreign banks entered the deposit market. The 2009 ratification of CAFTA-DR ended the state’s monopoly in the insurance sector.

FAQs

How did the State’s footprint in Costa Rica’s financial sector evolve historically?

State banking monopoly began with early state-owned institutions established in the late 19th and early 20th centuries, then ended in parts of the system as private and foreign banks entered deposits in 1995. The insurance monopoly ended after CAFTA-DR was ratified in 2009, and the SBD was later created in 2008 to support development and inclusion priorities.

What is the core policy focus of the technical note regarding state involvement?

The note emphasizes the need for regular, evidence-based reviews based on public finance and developmental impact. It highlights whether public investment stock, income flows, and regulation-influenced funding flows can be redirected toward investments and funding with higher developmental impact.

What role does SBD play and what challenges does the note identify?

SBD is described as a good transitional system for development finance, with strengths such as a guarantee fund, an entrepreneurship development network, and targeting underbanked MSMEs. The note also indicates that the funding flow framework is unnecessarily complex and overly operationally dependent.

Jul 19, 2026

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