Extending Access to the Formal Financial System: The Banking Correspondent Business Model

This paper presents a study of the banking correspondent model to understand how it can contribute to enhance financial inclusion. Banking correspondents are non-financial commercial establishments that offer basic financial services under the name of a financial services provider, becoming access points to the formal financial system. The paper identifies and studies two different models of banking correspondents: pure and hybrid. It also provides a harmonized database with information about the number of banking correspondents by country, which helps in measuring access to the formal financial system. The database includes two types of information: the number of pure banking correspondent outlets (for 70 countries) and a classification of the e-money providers (in 73 countries). Key highlights from the paper include:

• People who generally do not use formal financial services, due to access restrictions to more conventional banking channels especially benefit from the banking correspondent model;
• Pure banking correspondent model is widespread in Latin America and the Caribbean due to the relatively advanced banking tradition in this region compared to other developing areas;
• Banking correspondent model is not usual in the developed world since access through the traditional banking channels is not limited, and banking through the internet is increasingly popular.