Bankable Frontier Weblog

In a previous blog post, I highlighted the comparative patterns in access to financial services which emerge as data becomes available from surveys in countries like Mexico and South Africa. Now Brazil can join the list of comparators.

A 2004 World Bank study reports comprehensively on access to financial services in Brazil. The report as a whole is useful for its breadth and depth of coverage, although long at some 300 pages. Of particular interest to the theme of this blog, however, is a section in Part 1 on demand side measures of access. This section analyses the results of a survey of access to financial services in urban areas of Brazil. Completed in 2002, the survey covered 2000 individuals 18 years and older. Although the survey had its own methodology which is not entirely consistent with the others, the broad findings fit the emerging picture for countries like Mexico and South Africa. These are all at somewhat similar levels of overall financial sector development.

 First, on levels of banked-ness: the report states that 60 million Brazilians have a bank account. Using the 136m Brazilians 15 years and older as the denominator, this implies that some 44% of eligible people are banked, very similar to the South African level of around 46% of people 16 years and older reported in FinScope SA 2004. However, in urban Brazil, a much higher proportion of people made use of banks for services such as bill payments, which does not require an account.

Second, on the profile of the unbanked, some further findings from Brazil resonated:

• A high proportion of people (some 30%) had had a bank account before but had closed it or had it closed, mainly because of problems in maintaining the required minimum balance. While this proportion may be higher than the nationwide figure because of the urban nature of the sample, the overall figure in South Africa of some 11% previously banked shows that banking ‘drop-out’ is a significant problem in both cases.
• Two thirds of unbanked respondents in Brazil indicated an interest in having an account. This is in line with the findings in SA and Mexico that most people are not unbanked by choice. The likelihood of being banked correlated closely with income in Brazil, as it does in South Africa.

The study found that physical location of outlets was in itself not a major constraint. This was partly a corollary of the survey covering only urban areas; but it is in line with the findings in the other countries. Much effort has been placed in Brazil to ensure that each municipality has a financial service point; but the report points out that this policy needs refocusing within municipal areas which may be quite large and diverse. Also, that merely having a point of presence does not bring greater access, if the products offered are inappropriate.

If these are the similarities, what is different about Brazil? One factor is the continued importance in retail banking of the two large state-owned banks, Banco do Brasil and Caixa Economica Federal. The Caixa in particular has taken steps to target low income people through an expanded distribution network and by developing suitable low end products such as its basic transaction account Conta Caixa Aqui. However, the survey found a general preference for private banks among those seeking deposit or credit services.

This preference was reversed however for payment services, largely because of the convenience of the loterica correspondent outlets of the Caixa. And this is another key factor in the Brazilian access equation: since the  Banco Central promulgated regulations to allow limited service correspondents in 1999, over 16 000 had been setup by 2002, most notably the lotteries network of the Caixa, and the post office network of private bank Bradesco. 

Harnessing existing retail networks to provide in essence ‘manned’ ATMs (via modified point of sale type devices) is a useful, low cost way to provide ubiquitous cash back and even deposit facilities to low income populations. This is now a proven path to extend the Bankable Frontier.

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