Page 78 - STRATEGY Magazine (G)

has contributed to the stability of the quetzal. The Corporación Bursátil is another exchange, formed in 1994, that trades both public securities and commodities.
Institutions that participate in regu- lated banking activities without author- ity are subject to significant penalties, including fines and prison time. Some enterprises, such as non-banking credit card issuers that do not belong to a financial group, micro-finance institu- tions, and some leasing companies still operate outside the regulatory sphere, but legislation is under
consideration for all
three.
OUTSIDE THE
SYSTEM
Although Guatemala has
the region’s largest economy, its per capita GDP is only about half that of other countries
in Latin America and the Caribbean. Just over half the population lives in poverty,
and 13 percent are in extreme poverty. Despite these discour- aging statistics, the population
still needs access to money and banking services to facilitate routine transactions, such as pay- ment for housing, food, and utilities.
A relatively modern phenomenon
is the emergence of mobile banking,
the use of cell phones to handle banking needs. This technology, pioneered in Latin America by Luxem- bourg-based telecom Millicom, operat- ing under the Tigo brand, is now acces- sible to nearly anyone with a cell phone and permits them to make payments or otherwise access funds without having to use an ATM card. Nearly three- quarters-of-a-million Guatemalans use mobile money applications to address
a range of financial needs, from paying bills to purchasing groceries and other consumer goods; the average size of these transactions is about US $85. Many mobile money users also receive remittances from expats working in the United States and elsewhere. About 83 percent of mobile money users live or work in the urban area encompassing Guatemala City.
Because of its ease of use and the penetration of mobile technology
throughout the population, it is anticipated that mobile money will be seen as a viable alternative to retail banking by the finan- cially excluded. Mobile money’s successful penetration has caught the attention of the traditional banks, which affiliate with the various mobile phone carriers to provide the banking services. BI dominates the field, with nearly two-thirds of the market; its closest competitor is G&TC with almost
accounts and access to credit in the form of credit cards, personal and business loans, traditional mortgages, and the like. To address the credit needs of the financially excluded, microfinance, a service similar in some respects to mobile money, is more and more filling the gap and producing profits for its sponsors and investors.
The practice of making exceptionally small loans—generally under US $1,000 and usually less than US $500—to entre- preneurs, microfinance funds a broad range of activities. For the rural Guatemalan entrepreneur, this includes starting, ex- panding, or diversifying a business such as raising livestock or poultry; growing fruits and vegetables for sale; operating road-
side vending locations; or manufacturing textiles. One of the most exciting modern
financing concepts, microfinance current- ly serves more than 400,000 Guatema- lans, who are carrying an aggregate
of US $320.5 million in outstanding loans from 27 separate microfi-
nance institutions, or MFIs. One microlender, Kiva’s
Friendship Bridge, extends loans exclusively to women
and reports an average loan of US $350 with a delin-
quency rate of 0.28 percent. Among Friendship Bridge’s several programs is a group borrowing plan in which
all members of the group jointly guarantee the loans, which are re-loaned as they
are repaid. Friendship Bridge also offers a non-formal
education program that addresses such concerns
as business management, health, money man-
agement, and, more recently, training
in violence against women.
Microfinance has at least two
recog- nized
weak- ness-
es.
The most common FACTOR holding users back
from adopting
MOBILE BANKING is the fear of
FRAUD
20
per-
cent.
BI’s
share,
though, is
limited solely
to the Guatemala
City metropolitan area, and it has no mobile pres- ence outside that area.
FROM POVERTY TO MIDDLE CLASS
Most of the banks that do business in Guatemala offer their clients a full range of commercial banking services, including checking and savings
76 STRATEGY
SPECIAL REPORT