New financial services in Paraguay
Marcelo Alvarado
Fiorio Cardozo & Alvarado
Asuncion
The Paraguayan Superintendency of Banks set forth for consideration of the Board of Directors of the Central Bank of Paraguay a resolution that will eventually allow the access to financial services to a segment of the population that has fewer resources than the average working class.
This resolution, whose adoption is expected shortly, establishes, amongst other provisions, the regulation of a figure that does not exist today in our financial system. The Non-Financial Agent; it is the possibility for a person or a company (non-banking entity) to act as an agent or correspondent for a bank, with reduced faculties. In this way, some sort of banking services may be rendered in local businesses such as pharmacies, supermarkets, gas stations and other small businesses qualified to operate as a Non-Financial Agent.
To be a Non-Financial Agent a person or company shall:
(i) Sign an agreement with a bank in order to carry out on its behalf banking operations that are established in the regulation.
(ii) Have no debts in arrears in the financial system.
(iii) Own shops open to the public which should have the physical infrastructure and human resources required in order to render the service in safe conditions.
Services that may be rendered through a Non-Financial Agent:
The Non-Financial Agent may provide credit collection services, withdrawal, transfer of funds, cash deposits in bank accounts, utility payments and other types of collections in general. It is important to mention that bank accounts may not be opened through these Non-Financial Agents.
Requirements to be met by the Financial Entity that wishes to designate a Non-Financial Agent are the following:
(i) Request in advance a one-time authorisation from the Superintendency of Banks.
(ii) Have a system that allows the Entity to have the information of the number and amount of operations made by each agent and monitor the effective implementation on the limits of the authorised amounts.
(iii) Perform operations through Non-Financial Agents through electronic terminals connected online with the technological platforms of the Financial Institution. This technological infrastructure will be audited at least once a year.
(iv) In each operation, a document issued by the electronic terminal located in the premises of the Non-Financial Agent shall be granted. This document must, at least, include the date, type of transaction and the amount of the transaction. It shall also include the Financial Entity´s and the Non-Financial Agent´s data.
(v) The Financial Entity shall set the limits for the provision of services agreed through the Non-Financial Agents.
(vi) The Financial Institution is responsible before the customer and before the Superintendency of Banks for the quality of the services rendered.
To date, the financial system is composed of 16 banks with 361 branches and 11 financial companies with 127 branches. The financial service reaches to only 30% of the cities in the country.
This new regulation will provide access to financial services to an important segment of the population, whom nowadays do not have access to these services due to their location; some areas are so far away from the population that the opening of a branch is not justified.
As it happens in other developing countries, it is very likely that the process of financial inclusion (of all segments of the population) will have an alliance with the mobile phones companies, since these companies provide the wireless connectivity that the Non-Financial Agents will require in order to make on line transactions with their Financial Entity. Moreover, the fact that the functionality of mobile terminals, including the low cost ones, support the applications for this type of transactions (mobile banking, electronic wallet, etc).