I recently realized that the savings are key to achieving financial inclusion in Mexico.
On 20 October this 2012 I was honored to participate as a panelist in the Convention of the Federation UNISAP in Puerto Vallarta, Jal.
For those who do not know, UNISAP is one of the largest groups of savings banks in Mexico, integrative body authorized by the CNBV.
It was a wonderful experience not only for the human quality of the participants but for what they taught me about the feasibility Collective Capital model , that certainly is a way to build a better and fairer society. Participating in this event opened me different perspectives: it provided me and taught me a lot. Which I greatly appreciate.
For my presentation, I did a little research on the savings and the huge success of this model in countries like Canada or Germany, where more active than the banks themselves (more) handle.
But I did not know much about how companies operate Collective Capital, which subject talked quite as 2012 is the International Year of Cooperatives. Listen experiences orally, success stories and above all conversations with many of the people who invited me and did me the favor of listening to me, gave me simply another view.
I also learned a lot about the challenges facing these businesses and discrimination to which they are subject by the Government and the Bank. For example, I had to share panel with Lic.
Salvador Torres Cisneros, President of the Pascual Cooperative (the company that makes the Boing and stubby) who also discuss the cooperative model, said many challenges they face. For example, to obtain credit they have to go abroad, because no bank in Mexico provides.
He also shared some of the history of the Cooperative and the way they have managed to move forward as a company. Really admirable.
My exhibition at the Convention UNISAP – For Savings
In my case, I talked about trends in financial services users in Mexico, and I used to transmit the financial sector weaknesses that can mean a niche interesting opportunity for Savings and Loan.
And curiously, the savings can be, from my point of view, the trigger element of financial inclusion in Mexico.
Like many of my readers know, I have often criticized financial inclusion schemes that have promoted the Mexican authorities. Mainly because from my point of view, do not reflect the national situation.
These strategies have revolved around two main axes:
Overcrowding means of payment, which has sought to achieve with the “Basic Accounts” and “Transfer Accounts” linked to a cell number.
Expansion of places where you can do banking, which we have tried to achieve with the promotion of Correspondent Banking.
The problem is that this helps, but not resolved. So that one can withdraw money sent through a Transfer Account, you need to go to a branch or correspondent banking. Unless you have another bank account to which transferred. And if there is no branch or correspondent Banamex or Inbursa in a rural zon, it becomes somewhat complicated (since they are the only two banks offering such accounts).
Also it works only with Telcel, not with any operator, which limits much functionality (and harms competition between phone companies, I by the way). Finally, send money has a cost of 1 peso plus what it cost to send a text message. This makes it expensive.
Correspondent Banking undoubtedly offer proximity and possibility of banking in many places, but at a cost. Many operations – even pay services – have a cost that can be between 7 and 10 pesos per operation.
Then, these schemes may work for people who already have a bank account and might at times be willing to pay for convenience. But it does not generate more people join the formal financial sector.
The savings and loan, by contrast, have a vocation of closeness to the people. Many are the only alternative in some communities forgotten by the Bank. They also have a social vision savers become members of these entities, and loans can only be granted to partners.
His business, unlike banks, is to miss the resources as cheaply as possible and lend to the most expensive rate than the market allows. It is to provide fair conditions to members in both cases.
Savings banks promote a win – win for all users (partners) and also to the business model. This does not happen what happens to the banks, “the bank wins of all, all.”
The experience of the Savings Banks in Other Countries
As I mentioned Germany and Canada, for example, two countries of first world, people rely more on savings banks or credit unions than in banks. Overall, given more resources to the banks themselves. And they are much more stable too, by the nature of their activities.
In Spain it was also a very successful model. The problem is that in that country grew so much that they ended up becoming banks to get into other niches. Which at the turn of the year it proved fatal.
Instead How it has cost the various bank rescues people – taxpayers – in the world?
The Status of Savings in Mexico
In our country the sector of popular savings banks have a great chance to grow. For some years there is a regulation that forces them to professionalize their operations risk management methodologies and standardization of processes. Which it is very positive for the sector and public users, as it offers certainty.
Later this year the deadline for the savings banks obtain their certification and are part of the formal financial sector. Those who succeed will not be merged with others that are certified in order to continue operating.
For many institutions, this has been a very interesting process and most are well aware of the value offered by the regulation, although it has also been complicated because many did not have these methodologies.
Give certainty to the shareholders, savers who put their money in them, is essential. What has hurt the sector has been precisely the lack of regulation and supervision of financial authorities of our country, in my opinion, have been responsible for fraud committed by shell companies savers.
What does it take to grow savings banks in other countries?
Well, the first step is the certification and operation of the same under a regulated scheme. But this must be accompanied by a strong pursuit of all companies operating erratically by the financial authorities. And this, unfortunately, failed.
The CNBV and Condusef have simply noted on its website those companies that are authorized . And suddenly emit “red flags” that no one really sees. But otherwise it has not done anything: continue to conduct their illegal activities as usual, which greatly harms society but also the sector.
Also lacking is that many savings banks to offer other services such as debit cards or bank transfers (though some already do).
This will be possible union way: associations as UNISAP Federation are working to provide a platform for all affiliates to enable them provide these services to its members.
Finally, something we should not forget, that the Federal Government include savings banks as a spearhead in the financial inclusion strategies.