For immediate release: July 31, 2008
Participation in Mexican Financial System Expanding Through Retailers, Says Dallas Fed Report
DALLAS—Attempts to reach Mexico’s unbanked population through retail outlets are aiding the nation’s transition to greater financial system participation, according to the July issue of the Federal Reserve Bank of Dallas’ Economic Letter.
In “Reaching Mexico’s Unbanked,” business economist Edward C. Skelton finds new initiatives are beginning to show signs of success in breaking many Mexican households’ reluctance to use banking services. Currently, less than 25 percent of Mexicans have a checking account, compared to 90 percent of U.S. households.
“These efforts, combined with government programs reducing regulatory burden and promoting competition, offer the promise of bringing low-income consumers the benefits of access to the financial system,” Skelton writes.
Retailers have found particular success reaching the unbanked, according to Skelton. Some retailers have started their own banks, providing small personal loans and savings accounts.
Other retailers have created joint ventures with large, established banks, offering small loans inside their stores, Skelton notes. For established banks, partnering with retailers provides two benefits: a way around Mexican households’ negative views of banks and a lowering of geographic barriers.
“Because people in even the smallest towns and poorest pockets of big cities visit stores, the strategy should allow banks to reach customers missed by traditional branching,” Skelton says.
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