36398 WORLD BANK WORKING PAPER Expanding Bank Outreach through Retail Partnerships Correspondent Banking in Brazil Anjali Kumar Ajai Nair Adam Parsons Eduardo Urdapilleta THE WORLD BANK NO. 85 WORLD BANK WORKING PAPER NO. Expanding Bank Outreach through Retail Partnerships Correspondent Banking in Brazil Anjali Kumar Ajai Nair Adam Parsons Eduardo Urdapilleta THE WORLD BANK Washington, D.C. 85 Copyright © 2006 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First Printing: June 2006 printed on recycled paper 1 2 3 4 5 09 08 07 06 World Bank Working Papers are published to communicate the results of the Bank’s work to the development community with the least possible delay. The manuscript of this paper therefore has not been prepared in accordance with the procedures appropriate to formally-edited texts. Some sources cited in this paper may be informal documents that are not readily available. The ?ndings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily re?ect the views of the International Bank for Reconstruction and Development/The World Bank and its af?liated organizations, or those of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank of the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/The World Bank encourages dissemination of its work and will normally grant permission promptly to reproduce portions of the work. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, Tel: 978-750-8400, Fax: 978-750-4470, www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Of?ce of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, Fax: 202-522-2422, email: pubrights@worldbank.org. ISBN-10: 0-8213-6702-1 eISBN: 0-8213-6703-X ISSN: 1726-5878 ISBN-13: 978-0-8213-6702-5 DOI: 10.1596/978-0-8213-6702-5 Anjali Kumar is Adviser in the Financial Sector Operations & Policy Department of the World Bank. Ajai Nair is a Consultant to the Agriculture & Rural Development Unit of the South Asia Region of the World Bank. Eduardo Urdapilleta is Senior Financial Economist in the Latin American and Caribbean Region of the World Bank. Adam Parsons is a Consultant to the Financial Sector Operations & Policy Department of the World Bank. Library of Congress Cataloging-in-Publication Data has been requested. Contents Abstract v Acknowledgments vii 1. Introduction and Summary 1 2. Characteristics of the Correspondent Arrangement 5 3. Growth and Penetration of Correspondent Banking in Brazil 9 4. Case Studies of Key Institutions Engaged in Correspondent Banking in Brazil 13 Caixa Econômica Federal 13 Banco do Brasil and Banco Popular do Brasil 18 Bradesco and Banco Postal 19 Lemon Bank 22 Case Studies: A Summary 23 Role of Correspondent Banking in Expanding Access to Financial Services 27 Regional Penetration 27 Poverty Outreach 28 Legal and Regulatory Measures Impacting on Correspondent Banking 31 Regulations Governing Correspondents 31 Comparison of Regulations: Bank Branch Services versus Correspondents 32 Parallel Changes in Regulations towards Micro?nance 34 Conclusions: Prospects in Brazil and Possibilities of Replication 37 5. 6. 7. Appendix Tables 39 Bibliography 49 LIST OF TABLES 1: Growth in Correspondents and Other Financial Service Points (2001–04) 10 2: Banking Correspondents—Volume and Value of transactions (2001–04) 11 3: Major Correspondent Banks (2000–04) 14 4: Caixa Aqui—Distribution of Banking Correspondents by type of activity and 15 Caixa Econômica Federal—Services at Caixa Aqui.