Reassessment of mainstream microfinance implies rethinking core ideas about public policy, public banking and social banking. Microcredit and microfinance emerged in the 1970s as an alternative to inefficient state institutions and old ideas about development that valued industrialization and large centralized state owned enterprises. The microfinance movement therefore created new networks linking social movements and non-governmental organizations, the private sector and capital markets to provide powerful new means to bridge the gap between banks and unbanked citizens in many developing countries. However, recognition of problems with excessive profit orientations and pressures from markets and private banks coincided with the financial crisis of 2007-8 to call for reassessment of core ideas about how governments and public policies, banks and microfinance institutions may reach the poor in developing countries and sustain financial inclusion in advanced economies amidst crisis. This paper reviews trends in microfinance, regulation, technology and promising experiences with banking and financial inclusion in developing and advanced economies. We argue that public banks, historical experiences with social banking, the untapped potential of large savings institutions in developing and emerging countries, new policies at central banks designed to accelerate financial inclusion, new information and communication technologies and broader reflections on the microfinance industry since crisis provide a variety of new perspectives on banking and agendas for financial inclusion. The paper is organized as follows. First, we report findings from our research on the Crediamigo microfinance program of the Banco do Nordeste do Brasil (Bank of the Brazilian Northeast, BNB) and downmarket policies of the Caixa Econômica Federal (Federal Savings Bank, Caixa) to rethink how governments, markets and non-governmental organizations may accelerate financial inclusion in developing and emerging countries. Second, we turn to the history of social banking to argue that past experiences with savings banks, cooperative banks and development banks also provide important references for today, especially given what we describe as a “back to the future” modernization of social banking since liberalization of the industry in Europe and developing countries. Third, we explore recent policies at central banks in large developing countries that seek to accelerate financial inclusion. For example, pilot programs to emit citizenship cards as bank cards promise to fundamentally alter banking and bring millions into the formal economy and market for banking services. Fourth, we examine two new policies and channels for reaching the bankless in Brazil, the creation of simplified bank accounts and use of correspondent banking institutions as points of sale and services for major banks. Fifth, we explore the importance of new information and communication technologies for these new channels for banks to reach the poor as well as other strategies such as mobile banking over cellular phones. Before concluding with comparative observations about financial inclusion, we explore another important development in Brazil – that of family grants as conditional cash transfers that rely on card payment technologies and other banking services and conduits.
by Kurt Mettenheim, Lauro Gonzalez
Download (788kB)