The role of information and communication technologies (ICT) in improving microcredit: The case of correspondent banking in Brazil

Finding ways to efficiently down scale micro finance services is one of the current challenges of Brazilian commercial banks. As commercial banks do not have strong tradition or know-how in this market, the expansion of such operations still depends on the building of specific capabilities and creation of business and technological architectures. This paper discusses how the use of correspondent banking (CB) arrangements can help Brazilian banks to face this challenge and increase their micro credit operations in an efficient way. The particular model of CB adopted in Brazil since 2000 has created an ICT-based business structure for banks down scale financial services out of traditional branches, typically in retail stores such as supermarkets, drugstores, lottery shops, post offices, and so on. The discussion is on how this ICT-based channel can be adapted to scale micro credit delivery. To address the discussion, we focus on one particular case, involving a CB arrangement between Banco do Brasil, one of the most important Brazilian banking institutions, and Banco Palmas, an accredited micro finance institution. This specific case provides an elucidating example of how the Brazilian ICT-based CB model can be used to help scaling up micro finance services, especially micro credit.