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Challenges and Advantages of Serving Marginal Rural Challenges and Advantages of Serving Marginal Rural Markets through Financial Cooperatives: Lessons from Markets through Financial Cooperatives: Lessons from
Mexico’s Rural Microfinance Technical Assistance Mexico’s Rural Microfinance Technical Assistance Project (PATMIR)Project (PATMIR)
Gabriela Zapata ÁlvarezGabriela Zapata Álvarez
COOPERATIVE FINANCE: GLOBAL GOOD PRACTICESCOOPERATIVE FINANCE: GLOBAL GOOD PRACTICES
The World BankThe World Bank
Washington, DC – 10 March 2007Washington, DC – 10 March 2007
SUBSECRETARÍA DE DESARROLLO RURALDirección General de Programas Regionales y Organización Rural
Dirección de Fomento de Organizaciones Financieras
Income-smoothing
Asset accummulation
Investment opportunities
Household:
Fuel local economy
Reduce income inequalities
Community: P O
V E
R T
YR
E D
U C
T I
O N
E F
F O
R T
Integrated (savings, credit, remittances, etc.)
Adapted / Demand-driven according to market segments
CREDIT
Commercial Banks?
Development Banks?
MFI’s
Savings & Credit Cooperatives
Other FI’s Proximity Mission Market knowledge Member-owned Numerous
Proximity Mission Market knowledge Member-owned Numerous
Specific Regulation
Special Programs
Defining Government InterventionDefining Government Intervention
It won’t happen spontaneously (other than informally), in the short / medium term and even long term
MRA=Marginal Rural Areas
FEDERAL GOVERNMENT SUPPORT PACKAGE TO PROMOTE FORMALIZATION
FEDERAL GOVERNMENT SUPPORT PACKAGE TO PROMOTE FORMALIZATION
MRA=Marginal Rural Areas
Promote access to formal financial services that are
savings-based, demand-driven and sustainable in marginal
rural areas
BANKING THE RURAL POORBANKING THE RURAL POOR
All market segments living in communities of ≤10,000 inhabitants in municipalities with very high, high &
medium marginality levels*
*CONAPO: Consejo Nacional de Población (National Population Council)
Savings Accounts • Investment • Credit • Remittances Insurance • Check-cashing • Utility Payments
Government Transfers • etc.
OUR TARGET POPULATION:OUR TARGET POPULATION:
INTEGRATED REGIONAL STRATEGY
…led by Specialized Technical Assistance Providers
INTEGRATED REGIONAL STRATEGY
…led by Specialized Technical Assistance Providers
CSGCSGCSGCSG
CSGCSGCSGCSG
R E G I O N(3-5 yrs)
R E G I O N(3-5 yrs)
CONTRACT: Work Plan
FIFIFIFI
Mobile Mobile
ServicesServices
Field Field PromotersPromoters
FI: Financial Intermediary CSG: Credit & Savings Group
FIFIFIFI TA
SPECIALIZEDSPECIALIZEDTA PROVIDERTA PROVIDER
SPECIALIZEDSPECIALIZEDTA PROVIDERTA PROVIDER
FI SELECTION CRITERIA:
Willingness & capability to comply with the law
Willingness & capability to expand services to marginal rural areas
Willingness to work with specialized agency according to Contract &
Work Plan
BranchesBranches
ServiceServicePointPoint
Huasteca
• Chiapas-Tabasco• Huastecas• Puebla-Tlaxcala
• Guerrero• Oaxaca
• Veracruz• Michoacán
Oaxaca
Michoacán
Puebla y Tlaxcala
VeracruzChiapas y Tabasco
Guerrero
77 REGIONAL PROJECTSREGIONAL PROJECTS = = 1010 States States 77 REGIONAL PROJECTSREGIONAL PROJECTS = = 1010 States StatesTA CONTRACTS
APPROACHES:
STRENGTHENED = 14
CREATED = 12
EXPANDED = 6
SOURCE: Julia Paxton, 2005
US $31 M
US$35 M
SOURCE: Julia Paxton, 2005
74%
STUDIES
PANEL SURVEY
STUDIES
PANEL SURVEY
F
E
E
D
B
A
C
K
Analysis to-date: BASE-LINE (2004) , comparing clients of
PSCS as a whole vs PATMIR FI clients
Analyzes the use of financial services, household expenditures and assets, economic activities of the household, receipt of remittances,
and economic shocks faced by the household
Analyzes the use of financial services, household expenditures and assets, economic activities of the household, receipt of remittances,
and economic shocks faced by the household
BANSEFI & SAGARPA
5 years (2004-2008)
5,800 households: 1,492 in communities served by PATMIR FIs 2/3 of sample is rural & 1/3 urban Treatment: ½ “banked” – Control: ½ “unbanked”
0
1
1% male
% urban
Adult literacy (%)
IncomeNEW
Country average
0
1
1% male
% urban
Adult literacy (%)
IncomeSTRENGTHEN
Country average0
1
1% male
% urban
Adult literacy (%)
IncomeEXPAND
Country average
DEPTH OF OUTREACH INDEX (DOI)DOI = Sums differences between
institutional outreach avg. (i) and country avgs. (c) for (N) categories of people
excluded from formal finance (e)
DEPTH OF OUTREACH INDEX (DOI)DOI = Sums differences between
institutional outreach avg. (i) and country avgs. (c) for (N) categories of people
excluded from formal finance (e)
STRENGTHENED
CREATED
EXPANDED
DOI= )(1
cnin
N
n
ee
SOURCE: Julia Paxton, Analysis of Mexico’s PATMIR Project, 2005
Strengthened
US$336Created
US$272Expanded
US$90
Strengthened
US$336Created
US$272Expanded
US$90
Jan. 2007:
CURRENT COST OF “BANKING” AN INDIVIDUAL
CURRENT COST OF “BANKING” AN INDIVIDUAL
COSTOS PROMEDIOFASE 1
9,0806,7443,4452,7572,1472,096
PHASE 1: INVESMENT, USERS & UNITARY COST, 2003-2007
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2002 2003 2004 2005 2006 2007
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Inversión Socios Costo promedio
$2,096
$361MDP
172,520
COSTOS PROMEDIOFASE 1
9,0806,7443,4452,7572,1472,096
PHASE 1: INVESMENT, USERS & UNITARY COST, 2003-2007
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2002 2003 2004 2005 2006 2007
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Inversión Socios Costo promedio
$2,096
$361MDP
172,520
(Mexican Pesos)
OUTCOMES:• Physical & Human
Capital
• Sustainable and Regulated FIs
• Permanent access to integrated financial services by households and individuals in marginal rural areas
OUTCOMES:• Physical & Human
Capital
• Sustainable and Regulated FIs
• Permanent access to integrated financial services by households and individuals in marginal rural areas
NOTE: Unitary Cost is based on new users only.
US$190
The marginal rural population constitutes a viable market.
No single methodology / technical consultant is required for attaining good results. Various models and approaches can be used to reach the rural poor successfully and sustainably. Adapting to local conditions has been essential to success.
Existing institutions bring a pre-established culture, which has a high price.
New institutions require high start-up costs, but creation of a new FI can be justified in some cases and be successful with adequate support.
Providing financial services in marginal rural areas does not impede compliance with regulatory requirements.
Operational sustainability can be achieved by new FIs in 3-5 years.
Obstacles to providing services to the rural poor can be overcome through adaptation and innovation.
Governance
Human Capital
Portfolio quality
Remaining in marginal rural areas
Rural infrastructure and security
Institutional Context: Regulation & Supervision
Sector Networks
CNBV
Conf.
Feds.
FIs
CongressGov. Auth.
COOPS.Organized
NOTcomplying
FIs.Not Organized
Illegal
Lobbying to change regulation
Capacity to autorize & Supervise
Mergers
Incentives to Federate
Financial Literacy
Aux. Superv. & TA
Take action to close down?
UNSUPERVISEDCost vs Risk
Role of Government & donors?