Nationwide Impact of Agents in Brazil

This is the final blog in a series about the impact of branchless banking agents in Brazil. Sarah Rotman blogged about how two merchants – Nestor and Roberto – see the business, and Claudia McKay examined the impact on communities and consumers, looking through the eyes of a small town in the Amazon.

These insights come from a recent mission to Brazil to look at the business case for agents (termed “banking correspondents” in Brazil) and good practice for building a viable agent network. We partnered with the Center for Microfinance Studies at FGV (Fundação Getulio Vargas) and PlaNet Finance Brazil.

This post looks at the national-level impacts of having such huge agent networks. Brazil has the largest agent network in the world with more than 140,000 agents, 47,000 of which are authorized to handle deposits and open accounts. By comparison, there are 3x fewer bank branches nationwide. But the impact goes beyond just the number of service points…

Brazilian agents handle 2.4 billion transactions per year. This actually comprises just 7 percent of transactions flowing through the Brazilian banking system. But it includes large flows of transactions which are particularly interesting for financial inclusion.

• Most of the Brazil’s social transfers to 12 million poor families are cashed out at agents, and Caixa Economica is in the process of migrating these recipients to having a bank account.
• Most repayments on consumer credit are made through agents, which have the bandwidth to handle the huge boom in bank loans to households: a five-fold increase in 6 years (USD 54 bil in 2003 to USD 252 bil in 2009). Banks also love agents because they help decongest bank branches – though many branches are clearly still clogged.
• Agents are important to rural access to bank accounts. 1 in 4 municipalities has no bank branch, but all have agents. Our recent research shows rural and small town agents do just about as many transactions daily (137) as others, but handle more withdrawals and deposits as a proportion of their transactions (38%) than urban agents do (8%).

However, our research found agents make just USD 4.34 in profit per day, or about 3 cents per transaction. Scarcely a huge amount.

How have Brazilian banks managed to make this a viable proposition for merchants, and to successfully manage their networks? Some insights in a future blog post!

◦Download more detailed research on Brazil from CGAP and FGV

-Mark Pickens