WSBI El Salvador member chief exec explores innovation, financial inclusion.
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Fedecrédito is the federation of a system of credit unions and workers' banks, taking the form of a private co-operative, which was set up 75 years ago, its entry into the history of El Salvador coming three years after the establishment of the first credit union.
Fedecrédito is one of the members of Sistema Fedecrédito, along with 48 credit unions, seven workers' banks, two insurance companies and Fedeservi, a subsidiary of Fedecrédito complementing the financial services provided to its partner institutions. The whole group is 100% made up of Salvadoran and private capital.
Fedecrédito plays a series of fundamental roles for its partners (the credit unions and workers' banks), i.e. a) Second-tier bank; b) Supervisor under self-regulation of the partner institutions of Sistema Fedecrédito not overseen by the Financial Regulatory Authority; c) Administrator of the Joint Technological System; d) Manager and administrator of the corporate business, including credit and debit cards, family remittances, current account, collection service, payment of conditional government transfers (subsidies), Fede Red 365 ATMs, Fede Punto Vecino, Fede Móvil, Fede Banking, call centre, etc.; e) Specialist consultancy on all aspects of management; f) Institutional and international representation of Sistema Fedecrédito; g) Driver and promoter of new products and services; h) Development driver of Sistema Fedecrédito; i) Management of the Joint Training Centre, which provides highly specialized training to all members of Sistema Fedecrédito; j) Management of the common brand and communications campaigns of Sistema Fedecrédito.
According to its legal mandate, Fedecrédito's fundamental objective is to foster the development of its partners to make them efficient, solvent and competitive, able to play their role of providing financial services to low- and middle-income families and micro-, small- and medium-sized businesses in the various economic sectors.
The IFC, a member of the World Bank Group, has acknowledged the variety of functions undertaken by Fedecrédito for its partners, seeing it as a success story and example for federations across the world.
Sistema Fedecrédito has experienced significant growth over the last decade, so that it currently ranks second in terms of assets and third in terms of deposits in the financial system of El Salvador.
Business strategy in recent years has considerably extended territorial reach through the growth of the non-banking correspondents (Corresponsales no Bancarios - CNB), known commercially as “Fede Punto Vecino”, together with the development of our digital channels Fede Móvil and Fede Banking (mobile and Internet banking respectively).
Sistema Fedecrédito is the network with the greatest national coverage and enjoys tremendous emotional closeness with customers, reflected in the features of its brand, which Salvadorans value and love.
Fedecrédito has committed to the financial inclusion of all Salvadorans, striving through the members of Sistema Fedecrédito to bring products and services closer to the people, as well as taking a particular interest in developing cost-free savings products for partners and customers, thereby helping to improve access to banking services, in addition to backing up its efforts with financial education programmes.
As regards financial intermediation, we have broadened the base of international institutions with which we work, including the IFC (World Bank Group), IDB, FMO (Dutch development bank), DGW of Germany, Proparco of France, amongst others.
We want to go on growing profitably to contribute to the development of El Salvador. The major medium-term challenges are to continue increasing commercial activity and brand presence throughout the country, push on with digitization of our business, grow in the micro, small and medium business segment, drive bank-insurance business models and increase our presence in the youth segment.
We are well aware that getting to a position of leadership means working even harder to stay competitive.
The credit unions and workers' banks in Sistema Fedecrédito are co-operatives enjoying a strong local presence and closeness to customers, with more than 78 years' experience; historically, they came into being to help small traders and farmers. The origins of microcredit at global level can be traced to the Crédito Popular, which we set up way back in 1952. It provided microcredit to the microbusinesses in the country's markets, with two-month terms and fixed daily payments. It offered an extraordinary incentive in that instalments included a small savings fund element, building up throughout the year and being returned to customers in the Christmas period. It was known as “Christmas Saving”.
There are innumerable examples and success stories we could mention of the development of small businesses and enterprises thanks to support from the credit unions and workers' banks, but I think the data speak for themselves. We have 1.1 million partners and 700,000 active customers within a country of 6.5 million people.
Financial inclusion is a key priority for Sistema Fedecrédito in El Salvador, going hand-in-hand with a financial education programme which provides our partners and customers with the necessary tools to learn and turn they have learned into to their own advantage. The Federation promotes many things. First, it promotes the creation of specific products. It also promotes the design and administration of the CNBs. It also looks to bring the various financial solutions closer together, through various means such as the Fede Red 365 ATMs, Fede Punto Vecino, Fede Móvil and Fede Banking.
The Federation also promotes a financial education programme for various segments of the population, the content of which is drawn up at the Federation in co-operation with the German Savings Banks Foundation for International Co-operation and different organizations in the country, namely the Central Reserve Bank, Financial Regulatory Authority and educational institutions.
Sharing experience is key for us. Through the WSBI we have been able to find out about and visit various successful projects, apart from discovering the main trends and challenges in applying technology to financial inclusion.
We believe in a model combining digital channels with a strong physical presence, where the CNB model plays an important role in distributing financial products and services. This combined focus reflects the fact that some transactions are no longer carried out at branches, but rather through many different methods such as the ATM network Fede Red 365, Fede Punto Vecino, the mobile app Fede Móvil and Internet banking Fede Banking.
Digital transaction banking must be based on a broad range of savings accounts, so that it is possible to pay for utilities, receive family remittances, pay for loans and bank cards, etc. That explains why it is very important for us to encourage the habit of saving and use of banking services. In this way we are creating an ecosystem with a broad base of customers, which will enable us to go deeper into digitization, such as with virtual POS or specific digital products.
Digitisation will make it possible to offer cheaper financial solutions to boost financial inclusion. The key for us is to create an ecosystem which will eventually result in digitization of financial flows. One small example is the operation of the mobile app, which means that a family remittance sent from the United States for collection in cash in El Salvador can be received on Fede Móvil, where the customer may redirect it to a savings account, facilitating financial inclusion.
The opportunity to share experience and attend the various forums organized by WSBI is vital, but each member of the WSBI must find their own path to digitisation, based on two fundamental premises. First, alignment with customers' needs and corporate strategy. Second, adequate technology, which does not necessarily have to be the most advanced.
As an example of success here, we could tell you about the Dual Training Programme. In line with our corporate social responsibility policies to support education, it was set up at Fedecrédito in 2010 when a co-operation agreement was signed with the Sparkassenstiftung für internationale Kooperation as a counterpart to the regional “Strengthening financial education and training and qualification schemes in Latin America” project. The diploma course for financial technical advisers was developed in connection with this programme. Accredited by José Simeón Cañas University (UCA), it has seen two groups graduate since 2014 and the third is well on the way. More than 55 young people have benefited.
In Sistema Fedecrédito, especially in the Federation, we always keep an eye on the direction taken by international financial regulation, because we know that, sooner or later, it will affect us.
We are well aware of how important it is for regulators to understand the differential nature of the risks assumed by institutions like ourselves: exclusively dedicated to the retail business. At the same time, we believe that regulators should promote financial inclusion.
WSBI Vice President / Treasurer
President of FEDECRÉDITO – Federación de Cajas de Crédito y Bancos de los Trabajadores (El Salvador),
Mr. Rosa has 35 years’ experience in the FEDECRÉDITO System. From 2009–2012 he was chairman of the Latin American and Caribbean Regional Group of WSBI. Macario Armando is a Member of the FEDECRÉDITO Standards Committee as well as a Member of the Institutional Executive Unit (IEU) responsible for managing the Modernisation Programme for the System of FEDECRÉDITO, Credit Banks and Workers’ Banks, sponsored by the Interamerican Development Bank (IDB). From 1999 to 2001, he was Owner and Head of the Board of Directors of FONAVIPO (the National Popular Housing Fund). In 1992, he founded the Soyapango Workers’ Bank and he served as the General Manager Soyapango Caja de Crédito (credit bank) for 25 years. Macario Armando Rosales Rosa graduated in Public Accountancy and in Jurisprudence and Social Sciences.