Corporate Governance and Access to Finance - ESBG

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CMAC play a complementary role to private commercial banks by lendingto segments that lack financial support. However, the increasedcompetition in the MES segment has led CMAC to also entering thetraditional banking segments of commercial and consumption credit.It seems natural that CMAC try to satisfy their clients‘ needs as theyimprove their standards of living. Offering services to other segments inthe market does not alter the cajas’ financial inclusion policies. The increasein commercial lending compared to MES in some cajas should not implya departure from their original function. Given that for CMAC the marginsof commercial loans are smaller than MES loans, cajas may reconsidertheir strategy and focus on their core business.It is noteworthy that CMAC provide access to finance both in the goodand in the bad times, whereas commercial banks retire when economicconditions worsen. Thus, CMAC supported their clients during “El Niño”and during the recent global crisis (although mild and short-lived in Peru)while banks tended to abandon the MES clients when conditionsdeteriorate. This anti-cyclical behaviour contributes to financial stability.According to the interviews with CMAC Arequipa, Piura and Sullana, theirclients recognize their support, and once they “mature” and are temptedby banks, they tend to remain loyal to the cajas. This confirms that onlyinstitutions with a vocation for MES foster financial inclusion permanently.A further contribution of CMAC to the Peruvian economy is that thecomposition of credit of CMAC is particularly centred on local currency,in a country where dollarisation is widespread (although showing a certaindeclining trend). CMAC have contributed to the de-dollarisation of thePeruvian financial system and therefore also to enhance financial stability.As in the case of the German savings banks, the regional principle initiallyapplied to CMAC, precluding them from competing in a region differentfrom their own. However, the wide regional income disparities and thedesire to reduce geographical concentration of risks led the SBS toauthorize the opening of branches in other geographical areas, includingLima Metropolitan, the biggest nationwide. This authorization has hadpositive effects, since it allows for better risk diversification and makes itpossible to extend financial services to a wider segment of small andmicro entrepreneurs. Furthermore, it has promoted lower interest ratesand the competition is now more dynamic in the micro finance market.150
As of September of 2009, the twelve CMAC have 398 offices, 35.8 percentmore than in September of the previous year, of which 18 percent arelocated in Lima and 82 percent in the provinces. This geographicdistribution shows that CMAC have a broadly decentralized distributionnetwork and are committed to provide local and regional outreach.Agreements with non-banking correspondents (NBC) have beeninstrumental to the geographic diversification process in urban areas,which has only started. The agreements signed with NBC increase theoutreach and foster financial inclusion, but have some potentialdrawbacks that should be checked, like for example entering onto areaswhere the new entrant has no previous experience or knowledge, andobtains the marginal clients. The SBS is considering removing certainbarriers to the operational capability of NBC, like the opening ofaccounts, a move that would be positive for financial outreach.The alliance with Banco La Nación, a public bank, to use its branches inremote areas where it is the “Única Oferta Bancaria”– sole banking offer –has been positive and could be enhanced. However, this developmentshould be carefully assessed considering the long term synergies ofpotential partners.Some cajas are being particularly innovative in the implementation ofplans in their geographic expansion. For example, caja Sullana, is increasingits penetration by negotiating broader agreements with other networkssuch as pharmacies and gas stations under the new NBC regulation.To further expand its network CMAC Sullana is also using their own“Oficinas de Informe”, which do not perform operations but study creditunderwriting and channel clients to the nearest branch or NBC. Some areacquiring CRACs as a way to increase outreach in rural areas. Caja Piura’splan to expand its geographic coverage consists on moving from thecoast (the most developed and bankarised areas) to the interior (sierra(mountain) and selva (jungle) areas), which is less developed and lessbankarised. To rapidly increase its presence in rural areas CMAC Piura hasrecently acquired a CRAC (Caja Rural San Martín).Besides targeting segments of MES, which indirectly contributes to localentrepreneurship, CMAC reinvest a part of their profit in socio-economicdevelopment by financing projects in their provinces.151
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BoxesBox 1. German Sparkassen 27Box
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EXECUTIVE SUMMARYBackground and obj
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nnAccess to Finance in enshrined in
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Chart A.Corporate Governance, Acces
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nThe study also shows that Corporat
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1. INTRODUCTION1.1. Focus and objec
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WSBI members are by definition acco
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For the particular case of developi
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2. THE LINK BETWEENCORPORATE GOVERN
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Table 2. Main features of the Missi
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Access to financeSparkassen promote
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All these examples illustrate how p
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In the case of Peru, the profits th
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Among the WSBI institutions that re
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BOX 2. KENYA POST OFFICE SAVINGS BA
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The fact that the banking system is
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3. CORPORATE GOVERNANCE -CONCEPTUAL
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Figure 2. Sound Governance of Finan
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As can be seen in the figure above,
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nnnAt the same time, the distance a
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The first two elements (the ownersh
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nHowever, this does not mean denyin
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Cooperatives are similar to mutuals
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3.4. FoundationsFoundations do not
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3.5. Good Corporate Governance prac
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F. DISCLOSURE AND TRANSPARENCYPrinc
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4. ACCESS TO FINANCE -CONCEPTUAL FR
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4.1. Financial deepening and improv
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The board does not have any executi
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In other words, sustainable financi
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The following table shows how the W
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The fourth dimension refers to the
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Table 8. Access to Finance in the f
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Only 27 members established in 21 c
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nnDCI (Depth of credit information
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5.2. Corporate Governance and Acces
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5.2.1. Corporate Governance and Ave
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Chart 8.Specific Corporate Governan
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5.2.2. Corporate Governance and Ave
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Chart 13. Corporate Governance comp
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Chart 16. Corporate Governance Inde
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Chart 19. Specific Corporate Govern
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ANNEX 1: REVIEW OFTHE LITERATUREThe
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Even among the relatively narrow un
Page 99 and 100: Figure A.1. Structure of agents' re
Page 101 and 102: The table captures the essence of s
Page 103 and 104: A case study built by Clarke et al
Page 105 and 106: A very recent contribution to the d
Page 107 and 108: For example, in Latin America, WSBI
Page 109 and 110: The paper examines whether a poor e
Page 111 and 112: For the survival of microfinance in
Page 113 and 114: ANNEX 2: CASE STUDIES 32CASE STUDY
Page 115 and 116: It is one of the major characterist
Page 117 and 118: Although Sparkassen are legally and
Page 119 and 120: Figure A.2. Corporate Loans Market
Page 121 and 122: Financial education is also an impo
Page 123 and 124: Corporate GovernanceKPOSB is wholly
Page 125 and 126: Among the initiatives that the gove
Page 127 and 128: Related to the concession of credit
Page 129 and 130: OPERATIONS1. Deposit Base: It was p
Page 131 and 132: Corporate GovernanceThe Central Ban
Page 133 and 134: To address the problem of capital,
Page 135 and 136: Financial inclusion ranges very hig
Page 137 and 138: CASE STUDY 4:SPANISH SAVINGS BANKS
Page 139 and 140: The uniform financial regulation of
Page 141 and 142: Figure A.3. Governing Bodies - Span
Page 143 and 144: The web-based tool www.rededucacion
Page 145 and 146: On the liability side, CMAC offer m
Page 147 and 148: A specificity of CMAC is that the m
Page 149: Table A.3.MissionMissionCMAC AREQUI
Page 153 and 154: Furthermore, the consensus culture
Page 155 and 156: ANNEX 3: QUESTIONNAIREQUESTIONI. Ge
Page 157 and 158: ANNEX 4:THE HONOHAN INDEX 43COMPOSI
Page 159 and 160: COMPOSITE MEASURE OF ACCESS TO FINA
Page 161 and 162: ANNEX 5:QUANTITATIVE RESULTSCountry
Page 163 and 164: Overall Corporate Governance IndexO
Page 165 and 166: REFERENCES- Andrianova, S., Demetri
Page 167 and 168: - FSD Kenya (2009), Financial Secto
Page 169 and 170: - World Bank (2006) The Role of Pos
Page 172: WSBI - ESBG - The Global Voice of S
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Corporate Governance and Access to Finance - ESBG

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