Correspondent Banking in Brazil
“Banking for Non-Banking Poor”
(Part of our Capital Development and Emerging Markets series)
Sao Paulo, Rio de Janeiro, Brazil
Brazil is often recognized as a global pioneer in banking agent (banking correspondents) banking, as it was an early adopter of the agent model. Over the years Brazil has developed a mature network of bank agents covering more than 99% of the country’s municipalities. Other countries in Latin America have followed suit, including Mexico (2009), Peru (2005), Colombia (2006), Ecuador (2008), Venezuela (2009), Argentina (2010), and Bolivia (2006). Other countries around the world have also utilized the agent banking model to expand financial services, including Pakistan, Philippines, Kenya, South Africa, Uganda, and India.
The regulation, design, and implementation of banking agents and banking correspondents vary across countries. These differences are evident in the variety of services offered by agents, the types of businesses acting as agents, the types of financial institutions that work through agents, and the business structures employed to manage them. These differences ultimately contribute to the disparities in the extent to which banking agents are actually bridging the financial inclusion gap.
Banking agents help financial institutions to divert existing customers from crowded branches providing a “complementary,” often more convenient channel. Other financial institutions, especially in developing markets, use agents to reach an “additional” client segment or geography. Reaching poor clients in rural areas is often prohibitively expensive for financial institutions since transaction numbers and volumes do not cover the cost of a branch. In such environments banking agents that piggy back on existing retail infrastructure – and lower set up and running cost – can play a vital role in offering many low-income people their first-time access to a range of financial services. Also, low-income clients often feel more comfortable banking at their local store than walking into a “marble branch.”
A banking correspondent is a retail or postal outlet contracted by a financial institution or a mobile network operator to process clients’ transactions. The agent banking model is one in which banks provide financial services through nonbank agents, such as grocery stores, retail outlets, post offices, pharmacies, or lottery outlets. Unlike a branch teller, it is the owner or an employee of the retail outlet who conducts the transaction and lets clients deposit, withdraw, and transfer funds, pay their bills, inquire about an account balance, or receive government benefits or a direct deposit from their employer. This model allows banks to expand services into areas where they do not have sufficient incentive or capacity to establish a formal branch, which is particularly true in rural and poor areas where as a result a high percentage of people are unbanked.
Examples of Experience Sharing meetings:
- Febraban: Federation of Brazilian Banks
- Banco do Brasil
- Capital Markets and Micro Finance
Banks and IT Firms:
- Presentation of the successful Partnership between a Private Bank and a Retail Network
- Software for Network Integrators in Correspondent Banking
- Public Bank approach of the financial inclusion through the Correspondent Banking model/Post Office.
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