Two colleagues and I recently spent 2 weeks in Brazil interviewing agents (termed “banking correspondents” in Brazil) as part of CGAP’s three-country research on agent networks. We started last year with an analysis on the agent economics of M-PESA. We then turned our attention to Brazil, and in the next few months we will look at a country in Asia as well. In Brazil, we worked in partnership with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas), the leading business school in Brazil, as well as PlaNet Finance.

Brazil has the largest agent network in the world with more than 113,000 agents, close to 40,000 of which offer a broad range of banking services including cash-in, cash-out, bill payments, and account opening and loan applications. Agents in Brazil conducted 2.4 billion transactions in 2009. In contrast to Kenya, branchless banking in Brazil is bank-based and card-based. Transactions happen with point-of-sale (POS) devices at each agent location, not via mobile phones.

Our team visited four locations in Brazil in order to understand agent economics in different regions of this vast country – São Paulo, Brasilia, Fortaleza and Amazonia. We gathered data from about 300 agents and conducted interviews with a subset of about 50 of these agents to understand the motivations, challenges and risks involved in being an agent. We also had meetings with agent network integrator companies and the three largest banks.

Over the next few days, we will share some of our initial impressions of the impact that branchless banking has had in Brazil. There are five levels of impact that we will discuss.

1. Community impact: Using the case study of a small town in the Amazon (Autazes), this blog will share how agents have impacted one community, not only by making life more convenient for its inhabitants but also by making the town a hub for banking and commercial activities in the region.  The blog will briefly share how financial transactions worked when there were no agents within a 100 km radius and then how life changed with the arrival of agents.

2. Customer impact: This blog will go deeper into the case of Autazes to share how the arrival of agents changed the lives of average citizens. The elderly people were able to access their own pensions for the first time in years and were overjoyed to finally have control over their own finances. The blog will also share the story of one economically active woman who took advantage of the economic boom to buy a car and start a taxi service and has seen her life improve dramatically.

3. Merchant impact: This blog will profile two of the agents that we interviewed in Brazil. Unlike Kenya, most agents make very little money from commissions since the commission fee is very small, despite high transaction volumes. Instead, the motivation for merchants to serve as agents is to increase foot traffic into their stores and offer an added service to their customers. Since the bank or the integrator covers almost all of the costs involved in the agent business, such as providing the POS device and offering maintenance and support, most of the agents aren’t losing money on the business either, so it is a win-win situation…usually.

4. NGO impact: We often think of customers without looking at the nonprofits working in the community for social and economic development. In this post, we will look at Instituto Palmas, an organization based in Fortaleza in Brazil’s poorest region, the northeast. Instituto Palmas is led by a charismatic former priest who’s put financial sector development at the center of his work, forming nearly four dozen community banks with flourishing microloan programs, and converting each into an agent which helps connect the communities to the wider economy more effectively.

5. Country impact: One of the most attention grabbing figures about Brazil is banks have used agents to reach every one of the country’s more than 5,000 municipalities, one-quarter of which had no banking service point before the agent arrived. Agents are also critical to delivering the government’s social welfare grants on time and cost-effectively to more than 12 million families (one of the largest such programs in the world). Discussed less often is the impact on banks operating nationwide.

-Sarah Rotman