A new idea in banking for the poor: correspondent banking

A new idea in banking for the poor: correspondent banking

By teaming up with retail outlets in low-income, often hard-to-reach areas, financial institutions can create value both for themselves and their new customers.

NOVEMBER 2010

By Alberto Chaia, Robert Schiff, and Esteban Silva
Source: Social Sector Practice

Correspondent banking can significantly lower the costs of serving low-income clients.

Correspondent banking has become one of the most promising strategies for offering financial services in emerging markets. In this model, financial institutions work with networks of existing nonbank retail outlets—such as convenience stores, gas stations, and post offices—to deliver financial services. This approach can be especially powerful when serving the unbanked poor because of its ability to reduce banks’ cost-to-serve and reach low-income workers where they live. In Brazil, where the strategy has enjoyed its greatest successes, about 1,600 municipalities (approximately one-third of the total) are served solely by correspondent-banking outlets.

Correspondent (or agent) banking benefits a range of stakeholders. The poor gain convenient access to financial services in their own communities. Financial institutions reach a vast new customer segment. Agents increase their sales volumes and have an opportunity to develop deeper relationships with customers.

--
---------------------------------------------
CARLOS ANI - SEEDFINANCE Corporation - PhilDevFinance http://phildevfinance.posterous.com
http://phildevfinance.wordpress.com
http://www.carlosani.com
http://www.myclipps.posterous.com
http://www.seedfinance.net
Email: carlosani@seedfinance.net
------------------------------------------