Access to Finance in Chile and Latin America: Breaking Down Barriers - PowerPoint PPT Presentation

1 / 26
About This Presentation
Title:

Access to Finance in Chile and Latin America: Breaking Down Barriers

Description:

Brussels, 28-29 October 2004. Access to banking services in Latin America ... Credit: short, medium and long term (consumer, overdraft, housing) - Saving ... – PowerPoint PPT presentation

Number of Views:31
Avg rating:3.0/5.0
Slides: 27
Provided by: xpe
Category:

less

Transcript and Presenter's Notes

Title: Access to Finance in Chile and Latin America: Breaking Down Barriers


1
Access to Finance in Chile and Latin America
Breaking Down Barriers
Jose Manuel Mena V. Chief Executive Officer
International Conference on Access to
Finance WSBI / World Bank Brussels, 28-29 October
2004
2
  • Access to banking services in Latin America
  • Barriers / Restrictions on Access to Finance
  • Current and Future Challenges Removing the
    Obstacles

3
I. Access to Banking Services
Access to Financial Services Latin
America
WSBI, Sept. 2004.
4
Financial Depth Indicators Latin
America
WSBI, Sept. 2004.
5

Banking Development Level
Latin American Region ( of 2002 GDP)
Source Latin Finance, Latin Banking Guide
Directory 2003 (No. 149, August) and CEPAL.
6
II. Restrictions on Access to Finance
  • Economic
  • Sociocultural
  • Institutional
  • Operational

7
  • Economic Barriers / Restrictions in Lat. Am.
  • Low living standard and disposable income
  • Poverty (2002)
  • 44 of the population
  • Low per capita income (2002)
  • Annual average US 3,300 single country
    max. US 7,200 single country min. US 575
  • High rate of unemployment (2002)
  • 8.5 of labor force

8
  • Sociocultural factors
  • Rural population, far from commercial centers
  • Level of education (2000)
  • 11.1 illiteracy single country max. 50,
  • single country min. 2.4
  • Financial illiteracy
  • The population is generally unfamiliar with the
    financial system and the benefits of having
    access to it. On average, adult residents of
    Latin America access one banking product or
    fewer.

9
  • Institutional / Political Restrictions
  • Target population of banks is mainly high-income
    sectors
  • Little interest or incentive for providing
    banking services to low-income sectors
  • Low transparency in non-banking financial service
    activities
  • Scarcity and/or low quality of financial
    information on potential customers
  • Complexity of products and services great
    variation between banks

10
  • Operational Obstacles
  • High operating costs limit supply to lower-income
    sectors origination cost of consumer credit (US
    30, Chile), housing loans (US 300, Chile)
  • Out-of-date technology hinders cost reductions
    and large-scale supply of products and services
    (credit scoring, central processing facility,
    database)

11
III. Challenges to Increasing Access
  • Orientations
  • Greater access to banking services encourages
    economic growth, and vice versa
  • Authorities can promote access and potentially
    induce it through
  • Policies that favor stable and sustained economic
    growth
  • Banking regulations that promote greater market
    competition and transparency
  • Direct instruments

12
  • Introduce new technologies to reduce operating
    costs and prices of products and services
  • Set as a goal the ability of the entire adult
    population, or at least the labor force, to
    access three basic products a savings product, a
    credit product, and a payment product

13
  • Direct Instruments
  • Provide incentives for production and commercial
    activities to join formal sector.
  • Promote competition through dissemination of
    information by regulatory authorities on prices
    and other conditions of products offered by banks
    and parafinancial institutions.
  • Increase transparency of pricing by requiring
    disclosure to customer of total or final product
    costs (eg., total interest and commissions on a
    loan).
  • Direct subsidies.

14
  • Direct focused subsidies
  • Supply Subsidy to credit origination
  • Microbusiness (US 85, Chile each first loans)
  • Low-cost housing (up to US 17,000), to reduce
    fixed costs (US 175, average)
  • Subsidy to loan demand
  • Low and medium-cost housing (up to US 28,000
    upper limit of subsidy US 3,700)

15
Direct Instruments (cont.)
  • Standardize financial information required by
    banks for assessing creditworthiness and risk
    reduction (eg., uniform financial statements for
    SMBs)
  • Broaden banking network in rural areas through
    creation of low operating cost units
  • Design low-cost mass-market products for lower
    income sectors (commoditizing banking products)
  • Encourage and induce payment of salaries,
    pensions and bills through banking system
  • Conduct educational / financial alphabetization
    campaigns aimed especially at younger age groups

16
  • BancoEstado, Access to Banking Services
  • Network the only bank in 152 of Chiles 342
    districts (branches and mobile access points).
  • Micro and small businesses Full service to
    110,000 customers microbusiness, 252 thousand
    credits between 1996-2003.
  • Mass-market products
  • Market solution to needs and aspirations
    savings, 90 market share housing, 67
    insurance (ranks 2nd in bancassurance) payment
    instruments.

17
  • Appendix
  • Access to Banking Services
  • Chile and BancoEstado

18
CHILE Rapid Expansion of Electronic Banking
19
CHILE Banking Products Per Capita
20
  • BancoEstado Access to Banking Services
  • General Information
  • Personal and commercial banking services
  • Total assets US 12,400,000,000
  • Equity US 630,000,000
  • Largest network of outlets in the country
  • 368 branches and sales points
  • Automated services 1,890 (5,000 including access
    through Redbanc ATMs)

21
Some characteristics of BancoEstado
  • Competitive large businesses, infrastructure
    projects, personal banking
  • Profitable (2000-03) BancoEstado All
    Banks
  • Before-tax profit 17.7
    17.3
  • Capital
  • Annual tax profit payments approx. US 100
    million
  • Solvent Best credit rating in Latin America
    according to rating agencies (SP, Moodys)

22
  • Presence in the country
  • One out of two Chileans has a savings account
    with BancoEstado
  • Two out of three families who have a mortgage are
    BancoEstado customers
  • In about half of the countrys districts we are
    the only bank

23
Access to Personal Banking Services
24
Access to Banking Focused on Medium and Low
Income Sectors
Market penetration of BancoEstado by
socioeconomic segment
Monthly family income (US)
70-90
Sample study, Metropolitan Region (Santiago),
July 2004.
25
BancoEstado Medium and Low Income Sector Share
by Product
65.3
26
Expansion of insurance
2440
1812
1344
Write a Comment
User Comments (0)
About PowerShow.com