1 Expanding Borders: Inclusive Finance at BancoEstado in Chile José Manuel Mena V. C.E.O. Access to Finance: Building an Inclusive Financial System The Brookings Institution/ World Bank Washington DC, May 30-31, 2006 BancoEstado

2 I. BancoEstado highlights History and future outlook Founded in 1953, with origins going back 150 years Total assets US$ 20.5 billion Role / aims To improve the quality of people’s lives by expanding access to finance To promote economic and social development To be a public commercial bank of excellence and to strengthen competition in the banking sector

3 Our Bank’s Vision and Status To enhance our economic and social roles while continuing to be competitive, efficient and profitable No. 1 in client base: ~8 million (1 out of 2 Chileans) No. 3 in loans (13% market share) Profitability similar to the industry’s. Contributed an annual average of US$ 100 million to the government treasury in taxes and profits over the last 15 years Best international risk rating for a commercial bank in Latin America -- together with Banco Santander New positioning in the market and in public opinion Market positioning

4 II. The challenge of expanding our borders Inclusive Financing – Basic Principles: Market solutions to social challenges: competitive, mass-market products and services Bank sustained by its customers: profitable, receives no subsidies BancoEstado

5 Leader in traditional products Savings accounts (80% of market) Mortgages (2 of every 3 bank mortgages) Network of branches (only bank in 41% of localities) Challenge: mass penetration of products Retail cross-selling of products Microfinancing (details later) Main requirements for success: Customer orientation (competitiveness, better service) Faster and more efficient operations, lower costs Remote banking (Internet, Contact Center) Automated transactions BancoEstado

6 0.6% 41% 37.3% 21.4% Branch network No coverage BancoEstado only Other banks only BancoEstado and other banks Percentage of Localities

7 Automated transactions

8 Barriers to accessing financial system: Informal nature of sector Information non-existent or of poor quality Low profitability per loan High assessment costs High potential risk Initial target (1996): 100,000 clients and 30% market share within 7 years III. Microfinancing experience Objective: encourage entrepreneurship

9 Created a microbusiness subsidiary in 19XX Commercial design Field assessment (credit scoring, no collateral requirements) Variety of products / specialized branches Full service to sector, segmentation of customers Technical design Fully integrated information network Information management  Business intelligence Georeferencing system Mobile units Actions / Innovations Optimize field work

10 Siguiente Georeferencing Basis for selecting: Reference points and new clients Types of clients to be visited: sales campaign, over-due debtors Branch customer portfolio Loan officer customer portfolio Shows customers in vicinity of chosen address on map Shows details of records of customers indicated on map

11 Mobile unit: similar to laptop or notebook, but smaller and easier to carry Use in sales process Improves loan officers’ management of customer visits (better use of time, entry and transmission of data to PC) Mobile Unit

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13 Identity Card Account – designed for people with no or partial access to banking or payments systems Providing accounts or payment media with no prior requirements and at minimal cost per transaction Enables users to: Receive paychecks and other payments Make payments and deposits, withdraw cash Electronic wallet for new “Transantiago” bus system Target number of beneficiaries: 3 million IV. New projects

14 Transantiago Serving people in many daily environments: A modern, efficient public transport system

15 Extend distribution network through alternative low cost channels (eg., Lottery Shop / Caixa Economica Federal and Lemmon Bank, both in Brazil) Services: transaction and teller facilities at POS terminals (withdrawals, deposits, utility payments) 2,500 service points in 270 localities by 2010 Social benefits Beneficiaries: 3 million users Transaction cost savings: approx. US$ 400 million Caja Vecina (Neighborhood teller)

16 Neighborhood teller Bringing our bank closer to people

17 Expanding Borders: Inclusive Finance at BancoEstado in Chile José Manuel Mena V. C.E.O. Access to Finance: Building an Inclusive Financial System The Brookings Institution/World Bank Washington DC, May 30-31, 2006