Expanding Bank Outreach through Retail Partnerships : Correspondent Banking in Brazil
This paper explores the extent to which formal, regulated financial institutions such as banks have been able to partner with "correspondents"- commercial entities whose primary objective and business is other than the provision of financial services. The paper illustrates the case of Brazil, where banks recently have developed extensive networks of such correspondents. Such arrangements result in lower costs and shared risks for participating financial institutions, making these arrangements an attractive vehicle for outreach to the underserved. Correspondent banking requires an enabling environment to emerge, and poses some regulatory challenges and some increase in risk. While there are reasons why this model was particularly successful in Brazil, it may be replicable elsewhere if appropriate regulatory adjustments are undertaken.
Summary: | This paper explores the extent to which
formal, regulated financial institutions such as banks have
been able to partner with "correspondents"-
commercial entities whose primary objective and business is
other than the provision of financial services. The paper
illustrates the case of Brazil, where banks recently have
developed extensive networks of such correspondents. Such
arrangements result in lower costs and shared risks for
participating financial institutions, making these
arrangements an attractive vehicle for outreach to the
underserved. Correspondent banking requires an enabling
environment to emerge, and poses some regulatory challenges
and some increase in risk. While there are reasons why this
model was particularly successful in Brazil, it may be
replicable elsewhere if appropriate regulatory adjustments
are undertaken. |
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