|Luis Souza||Vinicius Sahione|
On November 4 2015, Brazil's Central Bank published rules for setting up and operating credit unions. These rules are guided by the new legal framework established in August 2015 by the National Monetary Council (CMN), which regulates credit unions.
The new rules are a landmark in the centennial history of credit unions in Brazil. In particular, they introduce a new classification criterion that distinguishes between three different types of credit union: (i) full-fledged – which may carry out all transactions permitted in the segment; (ii) classic – which may not carry out transactions relating to dealings in gold, foreign exchange, stocks, commodities and derivatives; and, (iii) capital and loans – which, in addition to the previous restrictions mentioned, may not borrow from its members. The classification takes into account the activities to be performed, and no longer considers the associative nature of its members. The new framework also introduces governance standards, minimum capital requirements and client exposure limits.
Credit unions play a fundamental role in financing small businesses, a segment of undisputed relevance to the economic development of emerging economies. Alexandre Tombini, Brazil's Central Bank president, understands that the role of credit unions should be endorsed "as a channel towards financial inclusion, whether from a social point of view, by allowing the poorest and unattended parcel of the population access to certain formal financial services, or from a geographical perspective..., by fostering the reinvestment, in the same city or region, of funds generated locally."
According to the Brazilian Credit Union Organisation, there are approximately 7.5 million credit union members today. This is an 87% increase in relation to 2010, but it is still a good distance from the government's goal of 10 million members. The increase, nevertheless, demonstrates the force with which the phenomenon called 'bankarisation' (access to banking services) is taking root in Brazil, and is part of a larger movement towards financial inclusion.
According to data collected in 2014, the bankarisation phenomenon witnessed in Brazil over past decades derives from various measures adopted by the monetary authorities and reflects the need to insert 40% of Brazil's population into its banking system. For comparative purposes, in the same year, the non-bankarised segment represented 73% of Mexico's population and 8% of the population in the US.
Another example of Brazil's efforts to foster financial inclusion was its 2013 regulation of mobile payment tools. This regulation recognised that technological innovation would be the main force behind the financial inclusion process over subsequent years, in line with the G20's Principles for Innovative Financial Inclusion. Recent research shows that this sector already represents nearly 27% of all online payments recorded in the first quarter of 2015.
Likewise, Brazil's Securities Exchange Commission (CVM) has recently announced the potential regulation of crowdfunding, another mechanism that promises to spur financial inclusion in Brazil.
Technology and demands from the bankarisation phenomenon require new regulations and may have a transformational impact on financial inclusion in Brazil.
Luis Souza and Vinicius Sahione