1.8 Million People to Access Rural Financial System
1 Million People to Access Phone Banking
WASHINGTON DC, Deceber 1, 2011 – Underprivileged, indigenous, and female populations in Mexico’s rural areas will be the main beneficiaries of the Financial Consolidation and Inclusion Project that the WB Board of Directors approved on Thursday.
The project will benefit mostly low income groups (D and E, in an A-E scale).
The US$100 million loan seeks to improve the performance of the country’s credit and savings institutions, making it possible for them to expand their package of financial services offerings, especially in marginal areas of the country’s 1,250 municipalities.
While one million new users will be able to access their bank accounts via cell phones, it is estimated that 1.8 million people in underserved sectors will be able to access the financial system in 2015.
The use of formal financial products (transactions, deposits, credits, transfers, etc.) will replace informal services that are usually more expensive such as pawn shops and loans between individuals, among others.
“Access to formal financial services promotes economic and social development. Financial inclusion has always been a priority for Mexico’s development agenda. However, insufficient financial education, distrust of credit and savings institutions, as well as their limited access and lack of product and service variety, become obstacles to overcome,” said Gloria M. Grandolini, World Bank Director for Mexico and Colombia.
The financial inclusion program envisions several activities, including:
- Improve the performance of credit and savings institutions through training and technical assistance, database creation and improvements to financial communications systems;
- Expand access to financial products and services, thus widening the user base, providing more options for financial services and greater financial education;
- Improve the performance of the National Savings and Financial Services Bank (Banco del Ahorro Nacional y Servicios Financieros, BANSEFI); the project will expand technological capacities and train staff, as well as the staff of new institutions participating in the program;
- Manage the project and provide technical assistance, training and supporting materials to the staff in charge of project implementation.
The 120 entities participating in the program will be certified by the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, CNBV). Furthermore, the rise in deposits and credit activities will boost their profits.
The WB has been working with the Government of Mexico in reforming the credit and savings sector since 2001. With a wide variety of instruments and services, the Bank has provided consultancy services in public policy development and investments. It has also facilitated the exchange of South-South experiences, thus promoting a space to discuss successful global practices, studies, coordination with donor institutions (such as the Gates Foundation), among others.
The new project will cost a total of US$209.62 million, US$100 million of which will be financed by the WB, US$ 94.32 million by the Treasury and Public Credit Ministry (Secretaría de Hacienda y Crédito Público, SHCP)—the government counterpart—, and US$15.3 million by beneficiaries.
This is a variable interest rate (6-Month LIBOR) loan, plus a variable margin, with an 18-year maturity period. The opening fee has been set at 0.25 percent of the total sum. The project ends in July 2015.