Challenge
Financial inclusion, an essential tool for reducing poverty and boosting prosperity, has been one of Mexico’s foremost development challenges. In 2011, about 71 million Mexicans—65 percent of the nation’s population of 112 million—lacked access to formal financial services. This was a particularly serious issue in rural areas, where 78 percent of municipalities did not have even one point of service for residents wishing to make deposits, withdraw money, check balances, or make payments. Only 13.6 percent of the adult population had a formal savings account, compared to the regional average of 33.6 percent. Moreover, mostly in rural areas, a significant number of the service providers available operated as unauthorized, nonregulated savings and credit entities; with no deposit insurance, these entities’ savings were at risk, and they offered only limited access to proper and sound financial services.
Approach
The strategy underlying the Mexico Savings and Credit Consolidation and Financial Inclusion Project had five main strategies, which were applied by the National Bank for Savings and Financial Services (El Banco del Ahorro Nacional y Servicios Financieros, BANSEFI) during project implementation:
- Help unauthorized savings and credit entities (SCEs) to become certified to enable members to enter the formal financial sector and benefit from it.
- Strengthen the capacity of the authorized SCEs to better serve their members.
- Work with financial entities in rural municipalities to include people, especially women, in the formal financial sector. These entities include the Regional Rural Microfinance Technical Assistance Program (Programa de Asistencia Técnica a las Microfinanzas Rurales, PATMIR), a program specifically focused on expanding financial inclusion in rural areas, and L@ Red de la Gente, a network of entities offering a range of financial services, such as international and national remittances, third-party payments, and micro-insurance, among others.
- Provide financial literacy education for people living in rural areas, particularly to women, so they can make better decisions in managing their limited budgets.
- Create partnerships with the private sector to expand access to financial services in rural areas and to develop instruments for making deposits, withdrawing money, checking balances, and/or making payments faster, easier, and cheaper.
Results
The project, initiated in 2012 and closed in 2017, achieved the following lasting results:
- Deposit insurance now protects 9.5 million SCE members (compared to 6.1 million in December 2011).
- In the SCE sector, 91 percent of total assets and 87 percent of total clients are managed by 202 authorized SCEs.
- Financial inclusion now extends to 1.3 million new members, of whom 59 percent are women, 29 percent come from indigenous regions, 57 percent live in high and very marginalized areas, and 50 percent live in rural towns with fewer than 2,500 inhabitants.
- More than 1.8 million people, 90 percent of whom are women, received financial education, including the following:
- Approximately 139,000 people received financial education from SCE training representatives and subsequently passed the training on to their members.
- Training reached 114,000 students in 332 schools in 10 states, resulting in short-term positive impact on the financial culture and entrepreneurship of these elementary and secondary school children.
- The Social Inclusion Program benefited 1.6 million individuals.
- The number of service points providing financial services for BANSEFI’s clients increased threefold, from 1,800 in October 2011 to 5,600 in July 2017. Of these, 2,400 represent new banking agents.
- The number of banking agents increased from 95 in 2011 to 2,496 in July 2017. Agents now cover 951 municipalities, 69 percent of which are in areas with no BANSEFI branches and 58 percent of which are in areas with no L@ Red de la Gente presence.
- About 4.5 million people have available to them new points of access to financial services.
- The number of transactions through banking agents performed by the population in rural areas underwent exponential growth, from 2,500 transactions per month in 2016 to an average of 20,000 transactions per month in the first semester of 2017.
Bank Group Contribution
The World Bank, through the International Bank for Reconstruction and Development, provided a loan of US$100 million for this project. Additional funds were also leveraged via cofinancing from the government of Mexico and from participating SCEs, for US$82 million and US$21 million, respectively.
Partners
The main partner and implementing agency for the project was BANSEFI. A multidisciplinary team from BANSEFI led the design, development, implementation, execution, and monitoring of the work program. BANSEFI has been the implementing agency for two prior Bank-financed projects, and the implementation teams were strongly committed to implementing and monitoring the project. SCEs also played a central role in the project, contributing to the inclusion of more than 1 million people in the formal financial sector and the expansion of financial services access in rural areas. These results were primarily achieved through participation in programs such as PATMIR and L@ Red de la Gente.
Beneficiaries
Maricela Cardona Ruiz lives in Tlapa, a city in the mountain region of the Mexican state of Guerrero. Before the project, Maricela did not have access to credit from the formal financial system, but thanks to PATMIR, she became one of the 1.3 million people newly included. “My family members told me about this program. I received $5,000 with my first credit. Now, I run my street food business, and I’m independent. I can buy the products I need—oil, rice, beans—and the profits I make allow me to operate my business and pay my credit. Now, I am member of a Savings and Credit Entity. As such, I have many advantages. They trust me! I’m feeling good, I’m truly happy!”
Moving Forward
Since the project’s closing in 2017, BANSEFI has continued to support the consolidation of the savings and credit institutions and to deepen financial inclusion in marginal areas. Among its ongoing efforts are the following: (i) nonauthorized SCEs continue to receive support to become authorized or to start an organized exit proceeding, (ii) 720 new banking agents have been incorporated through a new private network expanding financial services, (iii) L@ Red de la Gente continues to provide its services and has developed a mobile app for its users, (iv) BANSEFI now offers financial education courses online, and (v) PATMIR has expanded its strategy for mobilizing diaspora remittances for productive purposes in rural areas.