One of the first issues at stake will be correcting the problem of large, unbanked populations.
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As participants at the Sao Paulo forum discussed, anywhere from 30 to as high as 40% of Brazil's population remains "unbanked," which is to say that they have no access to basic services such as savings accounts, loans and credit or debit cards. The result is to hold economies largely stagnant, unable to grow or develop as local purchasing power for both individuals and businesses is restricted to cash on hand.
"If you take what we call the PCE, the private consumption expenditure, which is the way we measure electronic payments in the total [nationwide] payments," said Ruben Osta, Country Manager for Visa's Brazilian office, "only between 22 and 24% of total payments in Brazil are made with credit cards, debit and other electronic means... 51% is cash, and cash is still growing faster than the other methods of payments."
This is a considerable problem, he explained. Banking and electronic payments are not only far more secure than cash, since it's easier to swipe a coffee can full of bills than to hack a bank account, but also allowing people access to modern finances is proven to grow local economies.
"We have many studies that confirm that when you do this movement [from cash to banking] the economy grows faster than with only paper based economies," Osta said. "In Brazil, for example we have studies that show that every 10% that you increase the [electronic payments], you grow the economy and you grow the tax revenues by 5%."
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Beyond merely spreading access to bank accounts, however, the forum discussed the urgency of spreading education and useful financial products across the economy. As one panelist discussed, many sectors of Brazil's population still live in heavily rural areas such as the Amazon rainforest and lack access not only to the modern economy but also to information about how to use the tools available to them.
"We discovered that a lot of people, before entering a banking institution or microfinance institution, they needed to have more knowledge about how to administer their own money," explained Maude Chalamet, Executive Director for PlaNet Finance
in Brazil, an NGO that focuses on helping to spread microfinance solutions into rural communities.
"So that's how we started to do a lot of programs with low income persons, excluded persons," she said. "We do work with personal finance, we do work with how to administer the money that they keep at home. We give them a broad overview about the banking sector and where they can go and how they can get credit."
One of the important issues that Chalamet said she sees in Brazil's economy is spreading what she calls "productive credit" rather than just consumer credit. While access to credit cards is on the rise nationwide, many people still lack access to the loans they need to start or expand their businesses.
"Because we are an NGO, we have to go where nobody goes," she said, pointing out areas such as the Amazon rainforest where many communities are still well beyond the reach of most corporate or government programs. "We go to communities, cooperatives and NGO's where the people, because they are in remote areas, they don't have access to widescale programs."
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The forum series is part of a wider program run by Visa, Inc. to spread financial education across the world, reaching into countries as widespread as Rwanda, Myanmar and even here at home in the United States. Each panel that the series will host this year will take a look at the individual country's challenges, discussing how education and access can be improved locally and what can be done to help make each economy stronger from the ground up.
The next event will take place on June 20, in Morocco.
The first forum in the 2012 Financial Literacy Series took place in Sao Paulo Brazil on May 7. Moderated by Samantha Pearson of the Financial Times, the panel included:
- Ruben Osta, Country Manager, Visa Brazil
- Luiz Edson Feltrim, Deputy Governor for Institutional Relations and Citizenship, Central Bank of Brazil
- Juliana Pereira da Silva, National Consumer Secretary, Brazilian Ministry of Justice
- Maud Chalamet, Executive Director, PlaNet Finance Brazil
- Vera Rita de Mello Ferreira, Co-Coordinator and Lecturer at the FIPECAFI
- Mara Luquet, Personal finance journalist
- Fabio Cassio Costa Moraes, Director of Financial Education with the Brazilian banking federation
The series will continue on June 20 in Rabat, Morocco and will host further events in Nigeria and Myanmar over the course of the year.
--Written by Eric Reed for MainStreet