Archive for: Mexico

Why bother about savings and credit? News this week that remittances from the US to Mexico grew a measly one percent to $23.9 billion in 2007, compared to growth of 17 percent in 2006.  That hurts people who depend on remittances. The Mexican central bank recently cut its economic growth forecast for 2008 by half a percentage point.

Low-value remittances to some extent sit at the center of branchless banking channels both card- and mobile- based. Their significance for economies like Mexico or Philippines or Kenya and elsehwere has been a driver for new low-cost remittance solutions such as G-Cash and M-Pesa. These approaches have been the inspiration for the new banking channels that CGAP has been writing about and working on over the last year.

When it comes to branchless banking, the remittance volume helps make both the business case to financial providers and is an important part of customer adoption of branchless channels. The high volumes for some corridors ($12.8 billion in official international remittance to Philippines in 2006) make the case for banks (and telecoms and others) to possibly invest either themselves in a sprawling cash-handling infrastructure or work with gas stations, post offices and retail providers to set-up agent networks. Customers are likely to use these channels to access remittances that are an important part of their livelihood. Some would even argue that the high remittance flows and their impact on the economy serve as a motivator for regulators to encourage lower cost innovations as they have in the Philippines.

But we have yet to crack the puzzle of how remittance recipients get to savings and credit. The frequently used Brazil example is worth mentioning again: billions of dollars in government transfers to low-income people via over 90,000 points - but just one in 25 of them (based on a CGAP survey) are actually saving. 

Around 45% of existing microfinance institutions still track and record their operations and accounting in excel sheets or even completely manually.  This costs a massive amount of time and resources, leaves room for error, prevents them from growing quickly, and undermines their ability to manage risk. Especially for smaller institutions the relative investment and maintenance cost is enormous compared to their size and operations.

How about completely outsourcing information systems (IS) to an external technology provider, so that the MFI can focus on its main business: handling client relationships and providing financial services?   Read the rest of this page »

Brazil’s ACSP Launches Global FICO Consumer Credit Scores
Fair Isaac and Associacao Comercial de Sao Paulo (ACSP), one of the largest credit bureaus in Brazil, have announced ACSP’s launch of Global FICO Score for Brazilian businesses - saying that “the launch of this innovative consumer credit-risk score makes Brazil the first South American nation to access Fair Isaac’s global-standard FICO credit risk scoring technology.”

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The many in-store Mexican banks have only begun to scratch the surface of the unfulfilled demand for financial services among low-income Mexicans. Or so hope Banamex, Soriana, and Wal-Mart Mexico, the latest entrants into the consumer credit bonanza in Mexico. The success of Banco Azteca, Coppel and other retailers who opened financial services outlets in their branches has attracted a wave of new competitors.

Banamex and Soriana recently launched a partnership making Banamex services available in all 240 Soriana stores, which see an average of 25 million customers per month. “Mi Ahorro Banamex” offers two products: a prepaid MasterCard card, redeemable at all Soriana and affiliated stores, and a savings card. They plan to introduce additional products, such as remittances and savings, in the future.

Wal-Mart’s approach is slightly different. Instead of partnering with a bank, they’ve decided to do it themselves. Banco Wal-Mart de Mexico Adelante is set to begin operations before the end of the year. Wal-Mart is certainly known for its low-cost, high volume business model, but will this carry over into their banking services? With 964 stores covering nearly every region of Mexico, the potential impact on the estimated 80% of unbanked Mexicans is huge.

Without getting into the debate on whether or not consumer credit is better, worse, or in fact the same as what microfinance institutions are offering, the impact of these new entrants will certainly be felt by both the consumer outlets as well as the microfinance institutions. And perhaps that’s not a bad thing, especially if it finally brings about price competition in this notoriously expensive market.

When thinking of Peru, there are many things that come to mind: amazing ceviche at the beach, beautiful landscape in the mountains, and definitely also the mystic Machu Picchu attracting around 40,000 tourists each year. There are rumors that it will soon be possible to take direct flights from Germany to Cuzco without having to travel via Lima, the nation’s capital. Each year around US$40m is generated through this tourist attraction.

But it is not only tourism that has been booming over the last years. The stock exchange grew 140% in 2006, Starbucks coffee shops are springing up, and people start shopping at international clothing stores. Microfinance representing around 5% of the financial sector (and around 30-40% in terms of borrowers) has also experienced positive developments and attracted many of the commercial banks. What has previously be a sector primarily targeted by the 25 “cajas” and 14 NGOs, is now a competitive market in which banks like Banco de Credito de Peru, Scotiabank, MiBanco, Banco de Trabajo aggressively go out to bank low-income clients. Great news? Yes, definitely, but there are still more than 78% percent of the population without access to finance, and 54 percent live below the poverty line.
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Despite economic gains in recent years, Mexico’s financial services industry has yet to reach all potential customers. In cities, as little as 15 percent of the population have access to financial accounts. In rural areas, the percentage plummets to six percent. These figures are partially due to limited supply of services, especially in rural areas, as well as demand-side constraints such as low levels of education, and negative perceptions of banking in general. Read the rest of this page »