Of Brazil's 5,500 municipalities, 1,700 until recently had no banking services. That means a huge chunk of the population couldn't save money in interest-bearing accounts, couldn't make purchases on credit, and couldn't build up the kind of financial record that could help them qualify for a mortgage or a car loan.
Now that's changing, thanks to regulations that allow banks to offer a new type of account, designed especially for the poor. Today anyone with a national identity card and tax number can open a bank account. And they don't have to walk into a bank branch to do it: The new accounts are available at corner groceries, post offices, and gas stations. With a PC or just a magnetic card reader, even a baker can be a banker, handling transactions such as bill payments, deposits, and withdrawals, and earning fees for each transaction.
For Brazil's banks, it's a chance to cast a wide net at little expense. The overhead is minimal, since there are no bank branches. And the cost of capital? Well, it's close to zero. That's because regulations introduced in 2003 allow banks to use up to 2% of their reserve requirement -- money that would otherwise be parked in a non-interest-bearing account at the Central Bank -- to make small loans to the poor. The interest charged on such loans cannot exceed 2% a month, a steal compared with the 10% to 12% most Brazilians endure. The amount of the loans is also capped, at $110 for individuals, and $370 for small businesses.
In a country where the retail industry has been convulsed over the past decade by the rise of Wal-Mart and rival discounters, Costco’s discount warehouse club is part of the revolution. But unlike Wal-Mart, whose low-cost labour model has provoked increasingly vocal criticism, Costco has managed to remain competitive while providing its workers with the highest wages and best healthcare plans available anywhere in the US retail industry.
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