Peru: Putting Strategy into Action with BIM and Digital Financial Services
For the past ten years, Peru has ranked first in the Global Microscope on Financial Inclusion, a ranking of enabling environments for financial inclusion produced by The Economist Intelligence Unit. The most recent report praised the government, saying, "Peru has remarkable institutional support for financial inclusion, especially good regulatory and supervisory capacity". Acclamation aside, access remains low; Global Findex reports that 29 percent of adults have access to an account at a formal financial institution. Therefore, although the country has laid the groundwork to enable an inclusive financial ecosystem, Peru still faces the problem of low adoption of financial services. In fact, Peru ranked last amongst its neighbors in the Brookings Institution's 2015 FDIP Scorecard.
However, digital financial services could offer a new path toward full financial inclusion. In the most recent Global Microscope, based on 2016 data, Peru earned its top spot in part due to the Modelo Peru initiative launched early in the year. Together with over 30 financial institutions and the four major telecommunications firms, the government formed a company to run BIM, a first-of-its-kind mobile payments platform that offers interoperability and aims to reach 2 million users by 2020. The insight driving this initiative is that, although financial access is low, approximately 65 percent of the population has a mobile phone. And lest this be thought of as a one-off tactic, a focus on digital payments is a major component in Peru's national financial inclusion strategy.
While the impact of this effort will not be realized immediately, the current situation finds that Peru still lags behind its regional and income-level peers when it comes to access to accounts at formal financial institutions. With the release of our Interactive Dashboard for Peru, we took a deeper look at how access to finance changed at the district level in recent years. In 2016, financial service providers (FSPs) reached 199 new districts. The number of districts covered by any type of FSP grew to 40 percent, yet 550 districts remain without any coverage. Banco de la Nación, already with the largest presence of any FSP, expanded and became the sole service provider in 28 percent of districts, compared to 15 percent in 2014. As of 2016, the state bank is present in 58 percent of districts in Peru.
The expanding presence of the state bank offers a unique opportunity to reach underserved populations and Peru is using innovative methods to do so. One such method is a partnership with JUNTOS, the conditional cash transfer program managed by the Peruvian Ministry of Development and Social Inclusion. For all beneficiaries of the program, a savings account is opened at Banco de la Nación where the money is deposited. Though an analysis of government data suggested that beneficiaries must commute long distances to receive their transfers, our analysis finds that 87 percent of households affiliated with the program received a transfer as of 2016. As the government works to improve accessibility through digital payments, the JUNTOS program presents an opportunity to put that strategy into action.
Outside of digital financial services, our data shows that bank correspondents also play an important role for financial inclusion in Peru. Forty-one percent of districts are supported only by correspondents, meaning no other type of access point is present. Banco de la Nación is the only service provider in over 60 percent of these districts that are dependent on bank correspondents, demonstrating the central role played by the state bank. As we noted in a previous post – Peru's Race to Reach Full Financial Inclusion – low-cost options such as correspondents could provide adequate services in sparsely populated areas.
There is little doubt that Peru must continue to reach out to underserved populations to meet its goal of 75 percent of adults with access to an account by 2021. Peru's emphasis on digital financial services, its sizeable network of low-cost bank correspondents and the large physical footprint of its state banks, all highlight the concerted efforts of various stakeholders. Though the enabling environment is important, increasing ease of access through innovative means – including interoperability efforts like BIM – is likely to increase usage of financial services.