Formal financial systems are characterized by lack of depth, leaving the majority of the population without access to financial services.
Consequently, low-income households use informal financial markets, which function with high interest rates and no regulations, making transactions insecure.
This situation has limited the growth of the productive activities, as well as the economic development at the regional level. Additionally, it becomes an obstacle to alleviate poverty.
In order to address this problem, developing countries had opted for two formal solutions.
Market Solution * trough the traditional financial sector.
State Intervention * by creating development banks or targeted funds.
None of these options have been able to overcome this market failure and thus to complete and deepen the financial system, therefore the demand for financial services for the poor remains unsatisfied.
Historically, both, the market and the state intervention models have not been able to cope with the challenge to deepen the financial system.
This situation generates the creation of an array of entities with different legal status aiming at serving the demand for financial services of the poor. Many of these have been in the market for more that 50 years and most of them have not been regulated and supervised by the financial authorities.
Thus the semi-informal solution has had a life of its own and has marginally been able to attend the demand.
The Microfinance Sector is formed by more or less 600 privately or collectively owned financial intermediaries, strongly linked to their communities.
The creation of Bansefi and the Formalization of the Sector
The public policy created to transform the popular banking consists in two strategies that should converge in time:
a) To support the transformation of the Sector into a framework that provides legal certainty and helps to strength their institutional capabilities.
Legislative action by Congress in order to approve an adequate Legal and Regulatory framework according to international standards.
b) Temporary governmental investment in the creation of central entities that provide services such as Second Tier Bank for the Sector that will be transfer to the sector.
Creation of a Developing Bank (BANSEFI) as the state instrument to promote and coordinate the transformation of the semi-formal sector.
Governmental temporary investment through fiscal transferences in order to strengthen and upscale the institutional capacity of the sector: Technical Assistance, Training, Technological Platform, Network Creation: L@ Red de la Gente, Communications Campaign, Second Tier Bank.
In order to support and coordinate the development of the Popular Savings and Credit Sector, in November 2001, the National Savings Patronage (PAHNAL) was transformed into the National Savings and Financial Services Bank (BANSEFI) with the aim of achieving three objectives:
To Promote Savings
To Develop Central Entities
L@ Red de la Gente
Savings and Credit Institutions Bank
To Support the Sector