Floating Bank Floats New Dreams for Brazilian Middle Class

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

Brazil’s booming economy has seen a dramatic increase in the size of its middle class. More and more people have been lifted out of poverty as a growing, stable economy overcomes years of political and economic instability. In 2010, Brazil’s economy grew by a record 7.5 percent, surpassing a previous peak in 1986 (Brazilian Institute of Geography and Statistics) (IBGE) (www.ibge.gov.br/english). The country’s gross domestic product (GDP) reached 3.67 trillion reais (US $2.21 trillion) in 2010, making it Latin America’s largest economy.

This strong growth is being fuelled by growing domestic demand in Brazil.

One key component in building personal wealth is the ability to save and bank. It is common across the global South for the poor and lower middle classes to be ignored by traditional banking services.

Freezing large numbers of people out of banking services is a double problem. Individuals are being denied a safe way to store and grow wealth and borrow to improve their economic situation, and the wider economy suffers because many millions are left out of the mainstream economy and can neither consume high-value products nor use services beyond those that meet the basic needs of daily survival.

This leaves many economies experiencing what can be described as a whirlpool effect: wealth spiralling around small clusters of people – for example those with privileged access to natural resources – but failing to spread across the whole of society. This has the effect of discounting the contribution made by the majority of a nation’s people. That majority is a market that needs tending to, not ignoring, as pioneers like the late C.K. Prahalad (http://en.wikipedia.org/wiki/C._K._Prahalad) have shown.

In Brazil, one major bank has woken up to this fact and is pioneering services for millions of the nation’s “unbanked” (http://en.wikipedia.org/wiki/Unbanked). Even wealthy countries like the United States have large numbers of unbanked people, often those living paycheck to paycheck and with little or no savings. In the US in 2009, 7.7 percent of the population fell into this category (Federal Deposit Insurance Corporation) (FDIC).

Banco Bradesco SA (www.bradesco.com.br) has pioneered reaching the poor and marginalised by opening branches in long-neglected places like the impoverished and crime-ridden shanty town favelas (http://en.wikipedia.org/wiki/Favela) that surround major cities like Rio de Janeiro and Sao Paulo. It is creating a path other businesses can follow.

“Every bank will care about these people eventually,” Odair Rebelato, the executive heading Bradesco’s retail banking outreach programme, told The Wall Street Journal.

According to FEBRABAN (http://www.febraban.org.br), the Brazilian Banking Federation, the number of bank accounts in the country has tripled in the past decade. It has surged from 42 million in 1997, to 126 million by the end of 2008. That still leaves around 50 million Brazilians who do not have bank accounts.

It’s not just poverty that cuts many Brazilians off from banking services – there is also the problem of isolation.

Brazil is home to the largest portion of the vast Amazon rainforest (http://en.wikipedia.org/wiki/Amazon_Rainforest), whose population is spread out in isolated villages reachable only by boat. The capital of Amazonas state, Manaus, is the economic hub of the region but transport links only connect it to major cities and not the region’s many isolated villages.

A solution to both problems comes in the form of Bradesco bank’s Voyager III, a three-deck riverboat converted into a floating bank. Launched in November 2010, the white-and-blue 38 metre riverboat ventures up the Solimões River on a journey to 50 isolated communities in 11 municipalities.

“It was something never seen before in the world – a floating branch,” Nézio Vieira, a Bradesco bank manager in São Paulo, told Monocle magazine. “We are now present in 100 per cent of Brazil’s municipalities.”

Luzia Moraes is a former housewife and now the manager of the Voyager III’s floating bank. The bank offers savings and checking accounts, personal loans and direct deposits. Most of the customers are public servants, pensioners and the poor.

It is a simple operation: a red banner is hung in a cramped former storeroom on the boat. Sitting behind a desk, Moraes has just three tools to offer the full banking services: a laptop computer, a printer and an automated teller machine.

Enterprising and adventures, Moraes even uses canoes and rafts to reach out from the riverboat to even remoter villages.

“Before, there were cases where people would take 10 to 12 hours by boat to get to a bank. It wasn’t worth it,” Vieira said. “To be able to serve these river-dwellers you need to go to them. Today the Voyager goes there.”

The Voyager III has signed up more than 1,000 new account holders by touring the river. It heads off every two weeks from Manaus, reaching as far as a remote town on the border with Colombia and Peru, Tabatinga.

The boat’s computers communicate with a satellite, allowing 24-hour access to the bank’s servers so people can access accounts and apply for loans.

A regional lifeblood, the Voyager III also carries 500 tons of beans, chicken, bleach and other goods to sell on the 1,609 kilometre river journey. The boat can carry around 200 passengers for the trip.

“People don’t know what to think,” Moraes told The Wall Street Journal, “but it’s not hard to explain that a bank can make things easier.”

Resources

1) Kenya’s Equity Bank: By offering Kenya’s poor people savings accounts and microloans, Equity Bank has captured 50 percent of the Kenyan bank market. Website: http://www.equitybank.co.ke

2) Safaricom M-PESA: Mobile phone banking in Kenya is proving highly successful. Customers can deposit, transfer and withdraw money using their mobile phones. Website: http://www.safaricom.co.ke/index.php?id=123

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