Contrasting Methodologies Used to Expand the Outreach of Financial Services to the Rural Poor:...
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Contrasting Methodologies Used to Expand the Outreach Contrasting Methodologies Used to Expand the Outreach of Financial Services to the Rural Poor: of Financial Services to the Rural Poor:
Lessons from Mexico’s PATMIR ExperienceLessons from Mexico’s PATMIR ExperienceJulia Paxton, Ph.D.Julia Paxton, Ph.D.
International Conference on Rural Finance Research: Moving Results into Policy and Practice FAO: Rome, Italy
March 2007
PATMIR: expanding financial PATMIR: expanding financial services in rural areas of Mexicoservices in rural areas of Mexico
3 Consulting firms3 Consulting firms
WOCCU, DID, DGRVWOCCU, DID, DGRV3 Methodologies3 Methodologies
Strengthen, Expand, NewStrengthen, Expand, New
NUMBER OF INSTITUTIONS ACCORDING TO NUMBER OF INSTITUTIONS ACCORDING TO METHODOLOGY BY CONSULTANTMETHODOLOGY BY CONSULTANT
0
2
4
6
8
10
12
DID WOCCU DGRV
new
strengthen
expand
OUTREACHOUTREACH
KEY POINTSKEY POINTS
1. BETTER CLIENT INFORMATION IS 1. BETTER CLIENT INFORMATION IS NEEDED IF OUTREACH IS A GOALNEEDED IF OUTREACH IS A GOAL
2. BETTER OUTREACH MEASURES 2. BETTER OUTREACH MEASURES ARE NEEDEDARE NEEDED
AVERAGE LOAN AND DEPOSIT AVERAGE LOAN AND DEPOSIT SIZE BY METHODOLOGYSIZE BY METHODOLOGY
(US$1 = 10.6 Mexican pesos) Dec. 2006 (US$1 = 10.6 Mexican pesos) Dec. 2006
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
new strengthen expand
Mex
ican
pes
os
Average Deposit
Average Loan
DEPTH OF OUTREACH INDEXDEPTH OF OUTREACH INDEXDOIDOI
0
1
1% male
% urban
Adult literacy (%)
IncomeNEW
Country average0
1
1% male
% urban
Adult literacy (%)
IncomeSTRENGTHEN
Country average
0
1
1% male
% urban
Adult literacy (%)
IncomeEXPAND
Country average
Poverty Outreach Index (PO)Poverty Outreach Index (PO)
)1)((),;(z
xqLogzxPO
where n = population sizex = income of the ith household below the poverty lineq = number of households below the poverty linez = poverty line = researcher designated weight
0
AVERAGE PO INDEX BY AVERAGE PO INDEX BY CONSULTING FIRM AND BY CONSULTING FIRM AND BY
METHODOLOGYMETHODOLOGYPO INDEX
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
DID WOCCU DGRV new strengthen expand
Operational Self Sufficiency By Methodology
0
0.2
0.4
0.6
0.8
1
1.2
1.4
new strengthen expand
Operational self sufficiency
Portfolio Quality By Methodology
0.00%2.00%
4.00%6.00%
8.00%10.00%
12.00%
Prov. Loan Losses /Outstanding loans
Portfolio at Risk
SO WHICH METHODOLOGY SO WHICH METHODOLOGY WINS?WINS?
I wish it were that simple!I wish it were that simple!
General trends:General trends:
New institutions have great outreach New institutions have great outreach and lower arrears but are costlyand lower arrears but are costly
Existing institutions have better Existing institutions have better sustainability measures but can be slow sustainability measures but can be slow to change and have portfolio quality to change and have portfolio quality problemsproblems
BUT….BUT….
New institutions are becoming more New institutions are becoming more sustainablesustainable
Existing institutions can and do reach the Existing institutions can and do reach the poor in addition to their other clients and poor in addition to their other clients and when motivated, can modify their when motivated, can modify their methodology to expand outreachmethodology to expand outreach
OUTREACH AND OUTREACH AND SUSTAINABILITYSUSTAINABILITY
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
SDI DOI PO Index
OUTREACH AND OUTREACH AND SUSTAINABILITYSUSTAINABILITY
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
SDI DOI PO Index
New StrengthenExpand
Trade-offs between outreach and Trade-offs between outreach and subsidy dependencesubsidy dependence
SDI Correlations
-0.6 -0.4 -0.2 0 0.2 0.4 0.6
loan size
#loans/staff
vol loans/staff
doi
marginal
po
GEOGRAPHIC COVERAGE GEOGRAPHIC COVERAGE CORRELATIONSCORRELATIONS
Average geographic coverage per branch correlations
-0.8 -0.6 -0.4 -0.2 0 0.2 0.4
loan size
travel time
#loans/staff
vol loans/staff
doi
marginal
po
sdi
HOW FAR OUT CAN YOU GO?HOW FAR OUT CAN YOU GO?
Rules of thumb from the fieldRules of thumb from the field
25 km radius depending on roads25 km radius depending on roads
No more than one hour of loan officer No more than one hour of loan officer traveltravel
Average of 10 – 20 minute travel time for Average of 10 – 20 minute travel time for clientclient
Going into areas with an integrated rural Going into areas with an integrated rural development strategy is helpfuldevelopment strategy is helpful