Correspondent banking in Brazil Social Performance & Outcome Assessment

Presentation Outline Context Objective Performance of commercial banks and their CB operations – Social, Environmental, Economic Outcome assessment of CB services on : – Clients – CB Operators – Local economy Methodology Indicators Next steps

Context Correspondent banking in Brazil INSERT DESCRIPTION OF CB AND THE SERVICES THEY OFFER

Objective 1.Identify indicators to measure : – The Social, Environmental and Economic Performance of commercial banks and their CB operations – The Outcome of CB services on : a)Clients b)CB Operators c)Local economy 2.Determine the methodology to obtain the data annually

Performance of commercial banks and their CB operations Social EnvironmentalEconomic Access : intent and outreach Cost and quality of services Information transparency GHG emissions Water consumption Waste management Profitability of CB operations Growth of CB offering

Social Performance Social EnvironmentalEconomic Measuring the social performance : Access DimensionKey questionIndicators Intent Do CB services have the objective to reach a social goal? Corporate policy or strategy to meet social objectives through CB Breadth of outreach What portion of the population served? How many clients are being served? How many are in rural areas? How many are women? # of CB/municipality # of CB/habitants or # habitants/CB # of unique accounts/population # of active clients/population Geographic distribution of clients # women clients/total clients # of different services offered Depth of outreach How poor are the clients? (based on national poverty line) National poverty line # poor clients/total clients Avg. amount of bills paid/month Avg. benefit payment value Avg. savings balance Avg. loan size Source: CGAP and The Social Performance Task Force

Social Performance Social EnvironmentalEconomic Measuring the social performance : Services DimensionKey questionIndicators Cost How much are the clients being charged for the services? Avg. fee per transaction Real interest rates of loans Quality Are clients being offered a variety of services? Are the services designed to meet clients’ needs? Is the bank committed to providing quality services (or to improving the quality) # of different services offered/client % all services % bill payment only % savings and payment etc. Client participation in product development Client services policy Client feedback mechanism Information transparency Are the cost of the services explained clearly to the clients? Transparency policy Access to clear and up to date information on pricing Financial education programs Annual report Source: The Social Performance Task Force

Environmental Performance Social EnvironmentalEconomic Measuring the environmental performance DimensionKey questionIndicators GHG emissions Waste management Water consumption Other

Economic Performance Social EnvironmentalEconomic Measuring the economic performance DimensionKey questionIndicators Profitability Growth Other

Outcome assessment of CB services Access to finance Over-indebtedness Financial education Satisfaction levels Income Assets Living conditions Health & nutrition Children’s education Women’s condition Time/money saved Local spending Longevity as a CB Profitability Benefits on other part of the business Impact on local businesses Taxes raised Other benefits DimensionsTarget

Outcome assessment of CB services ClientsOperatorsLocal economy Survey (Stratified randomization) Survey Secondary data : central bank and PROCON Interviews with local officials Secondary data (baseline + progress) Pilot in one geographic region Risks : self-selection bias, non- respondent bias, reporting bias, interviewer bias Risks : reporting bias, interviewer bias, availability of data Methodology

Outcome assessment of CB services Clients Indicators CLIENTS DimensionKey questionIndicators Access to finance What kind of financial services does the CB client have access to? # of active bank accounts, by type # of active loans, and reason for each loan (consumption, business, mortgage) # of other CB services used in typical month Over-indebtedness Is the client over-indebted? # of instalment missed on active loans Financial education Does the client with a loan know the real interest rate being charged? Ability to state the real interest rate on loan or cost of loan Satisfaction level Is the client satisfied with the services : Service Hours of operations Availability of funds Transparency Other… Satisfaction level (scale of 1 to 10) Fraud Has the client encountered fraudulent behaviour from a CB? Additional payment required Spending on premises required # of times that a fraudulent behaviour occurred in the last year

Outcome assessment of CB services Clients Indicators CLIENTS (cont’d) DimensionKey questionIndicators Income Is the client employed or self-employed? Has the income level of the clients improved? Employment status / sources of income Annual income Assets Does the household have assets? House, land, cattle, car, savings etc. Living conditions Have living conditions improved ? Home improvements (walls, roof, floor) Toilets, stove, refrigerator, TV Health & nutrition Has the family health improved? # of meals with protein/week Children’s education Do all boys 6-14 go to school? Do all girls 6-14 go to school? # of children aged 6-14 # of boys, girls that go to school Women’s conditions Has the woman’s economic independence risen? Education? Literacy? Access to services Economic participation Education level and literacy rate Time/$ saved Has access to a CB reduced the time and cost required to do a financial transaction? Time saved since use of CB Money saved since use of CB Local spending Has access to a CB led the client to spend more locally? Money spent with local retailers/month Money spent in other cities/month # of trips to other cities to purchase goods or services/month

Outcome assessment of CB services Clients Indicators CB OPERATORS DimensionKey questionIndicators Longevity How long has the CB been in operation? Months of operations Profitability Is the CB generating a return for the operator? Cost/revenue Total revenue received (commission, fees) Total operating costs (electricity, salaries etc.) Increase in staff since CB Services offered What type of services does the CB offer? Financial services offered Credit demand What percentage of loans are approved? # of loan applications received in last quarter # of loans approved/refused/in process in last quarter Other benefits What kind of spill over effects does the CB business bring to the operators Increase in patronage Increase in revenues other than CB revenues Other benefits / negative effects

Outcome assessment of CB services Clients Indicators LOCAL ECONOMY DimensionKey questionIndicators Impact on local businesses COMMUNITY WITH A CB : Have there been new businesses created since the introduction of the CB? COMMUNITY WHERE A CB CLOSED OR OPENED IN OTHER COMMUNITY (Novo Ceu) : Have there been businesses that have closed after the CB ceased to operate? # of businesses created (formal and informal) # of businesses closed (formal and informal) Taxes Did the municipality see revenues from businesses taxes grow? Decrease? Taxes raised in the municipality Other effects Has the municipality benefited in other ways? Has the municipality suffered in other ways? Sense of community Pride

Next steps Refine the data gathering methodology for the outcome assessment Develop the questionnaires for the three target groups Conduct a pilot to test the questionnaire and the methodology