Banking Services Transforming A Town in the Amazon

28 January 2012

One might think that a small town in the heart of the Amazon basin would be the last place to need banking services. Yet during a visit to one such town, Autazes, I encountered a community that credits banking services (via agents, termed banking correspondents in Brazil) with not only making life more convenient for its inhabitants but for sparking an economic boom. I was there in December 2009 as part of a research of agent networks (introduced in a previous blog post) which CGAP conducted along with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas) and Planet Finance.

What do the inhabitants of this small town of 15,000 people (30,000 including surrounding communities) in the Amazon need banking services for? For starters, about 20% of the adult population of Autazes as well as about 40 surrounding communities receive regular government payments (pensions, social welfare payments, etc.). Before agents came to Autazes, the nearest bank was a 12 hour boat ride costing $20 away. Most people would give their cards and PIN numbers to men whose business it was to physically carry cash to and from Autazes. These funds were frequently lost or stolen. The merchants in town who needed to deposit cash went themselves as they didn’t trust others with the large amounts. They would literally carry bags of cash on the boat and from the boat to the bank. Of course, anyone who did go to the city for financial transactions would also do their shopping there. It was safer to spend the money purchasing goods in the city – and bring all the merchandise back home by boat again – than bring the cash back to Autazes.

Life has changed dramatically in Autazes since 2002 when the first agent arrived. The thousands of people who before only had expensive, time-consuming and insecure ways to access money now have agents available to perform all their banking transactions. What is perhaps most surprising is the impact agents have had on the economic development of the town. As customers began receiving payments in Autazes, they naturally started spending this money in Autazes rather than traveling to the big city. Prior to agents, the few stores (less than 10) only offered basic groceries. Today, there are 36 retail stores offering a wide variety of products. The leaders of the community claim that a surge of recent development – growth in existing businesses, development of new businesses, a new road connecting Autazes with the city and a doubling of revenue collection for the town – all started with the introduction of agents. Autazes became the commercial and banking center of the region and is experiencing many additional benefits as a result.

The story of Autazes demonstrates that branchless banking not only improves the lives of individual customers but can foster economic growth for an entire community.

 

-Claudia McKay

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