10

Sa-Dhan Patrika

Volume 6

Issue 1

the GDP according to the International

existence of mechanisms enabling fast

Monetary Fund's `2002 International

remittance of funds to different regions is

Financial Statistics', this indicator is very

of crucial importance, especially for

low in Brazil -- only 29 per cent. This

regions where socio-economic conditions

situation is a result of both m a c r o -

r e n d e r the existence of financial

economic factors, such as high fiscal

institutions branches unfeasible.

deficit in the past (although we are

presently experiencing fiscal surpluses for

In this context, instruments such as drafts

some four-five years), high interest rates,

and cheque collections play an

and low growth rates, and some micro-

important role in the transfer of money to

economic factors, amongst them a slow

distant locations. Through the banking

judicial system and taxation of financial

correspondents it has been possible not

Banking

operations (a new bankruptcy act was

only to initiate the flow of money but to

correspondents

approved in January 2005 but its effects

settle cheques in places poorly served or

were created to

are yet to be examined).

lacking in banking services.

address the

geographical

Furthermore, micro-credit is just a small

Although existing in Brazil for a long time,

problem

f r a c t i o n of that, because of the

a big change in regulation occurred in

characterised by

traditional problems of scale (it is much

1999, when the range of services that

huge distances

cheaper to operate with larger deposits

could be hired was widened, enabling

and a scattered

and loans) and asymmetry of information.

banks to hire firms with the purpose of

population

Although specific statistics for micro-credit

rendering some banking services of

are very inaccurate, since the Central

collection and forwarding of applications

Bank only supervises financial institutions,

for opening deposit, chequeing and

we believe that the situation is quite well

s a v i n g s  accounts,  receipts  and

represented. In this sense, the main

payments related to such accounts, as

regulatory measures taken in order to

well  as  loans,  investments  and

enhance bancarisation are described

redemptions of investment funds.

in the following section.

The results are astonishing. Since 2001,

Main Regulatory Measures taken

after the necessary preparatory period

in Brazil

for banks to make all necessary

The challenge we face in Brazil is clearly

arrangements, including hiring and

complex; financial institutions have

t r a i n i n g of correspondents, and

many incentives to concentrate their

developing systems and internal

branches in the larger, richer cities, and

procedures (important to note that the

to target the richer clients. It is worth

responsibility for the services provided

mentioning here that over 1,600 towns

rests with the banks), points of sale grew

had no bank branches in February 2004.

more than 200 per cent. The number of

At that time, two questions arose:

points of sale is currently 60 per cent higher

1.  Should the Central Bank create

than the existing bank branches (there

incentives for banks to move and

are 17,000 bank branches and almost

reach out to other areas?,

27,000 providers of financial services in

2.  Should the Government design new

the form of correspondents).

institutions specially suited for that

task?

Furthermore, in the first semester of 2004,

the number of transactions carried out

T h e Federal Government and the

surpassed 500 million, benefiting 40 million

Central Bank then adopted the following

people including those living in the

measures:

suburbs of large cities or in other poor

1.  Developed a new regulation for

regions that did not have easy access

banking correspondents.

to financial services.

2.  Established simplified procedures for

opening bank accounts.

Although lending operations through

3.  Required compulsory lending to

correspondents are still very small, we

micro-credit.

expect they will represent, in the near

4.  Designed new institutions specialising

future, a very important vehicle for credit

in micro-credit.

extension.

Banking Correspondents

Another outstanding result is related to

Banking correspondents were created to

access to financial services in the

address the geographical problem

country. Since December 2002, every

characterised by huge distances and a

municipality in Brazil is being provided

scattered population. In a country of

with basic financial services through

continental dimensions such as Brazil, the

correspondents (post offices and lottery