Banking Correspondant Linkages and Financial Inclusion Strategies in Latin America

A comparative analysis of the bussiness models in Brasil, Colombia and Perú

Teresa Boada Serret y Aylén Rodríguez Ferrari (May 2015)

This dissertation was written for the International Master’s degree in Entrepreneurial Finance at Madrid’s Autónoma University, supervised by Claudio González-Vega (PhD). The research endeavours to conceptualise the banking correspondent (BC) channel, putting it into context, to show that it is the most widespread innovation in the area of branchless banking. It also analyses different business models and evaluates upcoming challenges and trends in the channel’s development. It studies the impact of BCs on financial inclusion (such as access to and use of formal, appropriate and fit-for-purpose financial services by individuals and companies that have traditionally been excluded from the financial system). Cost reductions and the significant potential from extending geographical and human reach will enable BCs to push back the frontiers of financial-service provision.

The dissertation conducts a comparative analysis of the regulatory framework and business model of BCs in Brazil, Colombia and Peru, based on a review of the literature, an analysis of the regulatory framework, and by collating statistics on a range of indicators, as well as interviews with acknowledged microfinance experts. These countries pioneered BC activity. Its analysis of the direct and indirect development models for the BC network leads to the identification of operational gaps (in how alliances have been designed, liquidity management, security and fraud risks, cross selling, interoperability and ICT technologies), and also to the identification of best current practices. The conclusions explain how regulation that is flexible, while still safeguarding consumer rights, together with appropriate market incentives, is part of the route to success for BCs as instruments of financial inclusion.