Mexico Microfinance Projects

Micro is small and finance is money. The causal definition of microfinance is small business. This concept was basically introduced for poor people in 1971 by Dr. Muhammad yunus(Bangladesh). Talking about Micro-Finance projects; popular one are saving credit Act and launching of US $150 million program the Mexican government launched compain to alleviate poverty and increase income-generating program for poor.

The Savings and Credit Sector Strengthening Program, BANSEFI

The Savings and Credit Sector Strengthening Program, implemented by the National Savings and Financial Services Bank (BANSEFI), is building the capacity of more than 400 “Popular savings and credit institutions” (or EACPs by their Spanish acronym) to meet new legal and regulatory standards and offer safer, more efficient financial services. EACPs target almost 3 million users who are generally among the poor and lower-income groups and have no access to commercial banking sector 25 percent of the population in the Mexico fall in this range. BANSEFI is developing an information system to link EACPs (those that elect to participate) to its network federations and confederations, the banking supervisor, and BANSEFI itself. This will offer retail services. BANSEFI also focus on the development of a voluntary internet-based network of savings and credit institutions called “L@Red de la Gente,” or “the People’s Network.” L@Red links BANSEFI’s 551 branches to more than 180 offices of 19 participating institutions, and creates an expansive network of more than 730 branches. Approximately 750,000 savings accounts have been opened as a new way to transfer government subsidies through L@Red de la Gente. As of December 2003, for example, 78 percent of the 633,974 people who received transfers through L@Red from Oportunidades had savings accounts with positive balances in branches of L@Red. the network also channeled more than US $53.6 million in remittance payments, sent from abroad to friends and family members. L@Red de la Gente offers accounts that link different savings and investment products.

Reaching the Rural Marginal Areas, SAGARPA; From the same strategy existing EACPs` secretariat of agriculture ,Livestock ,Rural Development ,Fisheries, and Nutrition (SAGRAPA) is now working in 13 states to set up a new savings and credit institutions. SAGARPA aims to bridge the gaps in knowledge, understanding, and interaction between these financial service providers and the communities of poor and mostly indigenous people living in the areas they serve. A survey of Mexico’s marginal rural areas in 2000 showed that just 2.5 percent of households had access to credit from a financial institution, and less than 6 percent used formal financial savings instruments. They generally pay high transaction costs and commissions to receive remittance payments.To combat these trends, SAGARPA began to implement the Rural Microfinance Technical Assistance Project (or PATMIR in Spanish) in 2001 to expand the network of EACPs into Mexico’s poor and isolated rural communities. The program has now expanded to three more regions of the country and is expected to sustainably integrate more than 80,000 people from Mexico’s poorest, most marginalized groups into the financial system before its completion in 2007. Program focuses on cultivating awareness, trust, and commitment—between the new members. PATMIR helps the EACPs to incorporate new ways; they can hire multi-lingual staff to promote their services and introduce personal digital assistants and mobile banking to make savings more convenient and attractive. In 2003, more than 4.2 million families received transfers through one federal safety net program alone, and US$13.2 billion in remittances flowed into the country from Mexicans living and working abroad.

Implementation Process. In 1999, the Secretariat of Finance and Public Credit (SHCP), the National Banking and Securities Commission (CNBV), the Central Bank of Mexico (BANXICO), and the National Savings Bank (PAHNAL) initiated a process of consultation with legislators, sector institutions, and the World Bank on the development of a new legal and regulatory framework for popular savings and credit institutions. In rural parts of the country, where the government had recently put forward major initiatives  by better integrating markets and targeting capitalization programs, especially at poorer groups in the rural sector.

The Scope of the Initiative; The US$150 million program, which BANSEFI initiated in 2002 in coordination with other public sector agencies. The Rural Microfinance Technical Assistance Project, or PATMIR, provides training in basic principles of household finance and participation in financial institutions for groups and individuals in marginal rural Communities.

Implementing BANSEFI and Progress to Date; A census of institutions was initiated in September of 2001 to determine more precisely the number and size of entities operating in the sector, their locations, and affiliations with other such organizations, if any. This information was used to help gauge the extent—and cost—of the program of technical assistance needed to strengthen the intermediaries. BANSEFI has recruited international organizations specialized in providing technical assistance to savings and credit institutions and their sector organizations began in 2001. Action plans have now been formalized for 381 institutions’, of a total of 400 that are expected to participate in the program. The organizational basis of the commercially- oriented network has already been formed with the establishment of “L@Red de la Gente” (“The People’s Network”), a voluntary internet-based alliance of popular savings and credit institutions and BANSEFI. L@Red has already linked BANSEFI’s 554 branches.

Implementing SAGARPA and Progress to Date; As of January 2004, PATMIR had so far strengthened and increased the outreach capacity of 41 savings and credit institutions and their branches and providing more than 10,000 clients with access to financial services from new branches or institutions, and improving the financial institutions upon which nearly 24,000 people rely.  The program now has operations in three more  regions of the country and is expected to sustainably integrate more than 80,000 people from Mexico`s poorest, most marginalized groups into the financial system before it finishes in 2007.PATMIR works extensively with individuals and groups in these rural. PATMIR helps the EACPs incorporate new ways of attracting and responding to marginalized clients by hiring multi-lingual staff to promote their services and introducing personal digital assistants and mobile banking to make savings more convenient and attractive.

Benefits for Institutions and clients ; Efficiency gains will accrue to the EACPs from staff training, upgrading internal controls, and building credit appraisal and risk management capacity, and through the services provided by BANSEFI and network organizations. The alliance BANSEFI has created with sector institutions through L@Red de la Gente (which currently includes more than 730 participating branch locations) is expected to include more 3,000 points of service by 2008. As of December 31, 2003,L@Red de la Gente had distributed payments from federal health, nutrition, education, and agricultural production programs to more than 1.5 million beneficiaries, and the number is expected to grow to 3.3 million by the end of 2004.By receiving transfer payments through L@Red, poor beneficiaries are introduced to financial institutions and encouraged to participate as members or clients

Sum up of all of above, Mexican micro-credit program BANSEFI and SAGRAPA`s(2001) main focus is not only to bring the poor in financial system but also teaching them how to better manage the cash resources they already have. From the BANSEFI and SAGARPA programs we concluded the following facts; Government intervention can effectively increase access to financial services for low income households and businesses by getting the regulatory framework right, building the institutional capacity of financial institutions, and subsidizing the deployment of modern technology to increase the efficiency of service providers. Packaging the development of adequate regulations and supervision, institution capacity building, and technological infrastructure is more likely to yield sustainable results. Outreach expansion efforts among the poor in marginalized rural areas have much better long-term impact.