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

Finding ways to efficiently downscale microfinance 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 microcredit operations in an efficient way. The particular model of CB adopted in Brazil since 2000 has created an ICT-based business structure for banks downscale 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 microcredit 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 microfinance institution. This specific case provides an elucidating example of how the Brazilian ICT-based CB model can be used to help scaling up microfinance services, especially microcredit.