When thinking of Peru, there are many things that come to mind: amazing ceviche at the beach, beautiful landscape in the mountains, and definitely also the mystic Machu Picchu attracting around 40,000 tourists each year. There are rumors that it will soon be possible to take direct flights from Germany to Cuzco without having to travel via Lima, the nation’s capital. Each year around US$40m is generated through this tourist attraction.

But it is not only tourism that has been booming over the last years. The stock exchange grew 140% in 2006, Starbucks coffee shops are springing up, and people start shopping at international clothing stores. Microfinance representing around 5% of the financial sector (and around 30-40% in terms of borrowers) has also experienced positive developments and attracted many of the commercial banks. What has previously be a sector primarily targeted by the 25 “cajas” and 14 NGOs, is now a competitive market in which banks like Banco de Credito de Peru, Scotiabank, MiBanco, Banco de Trabajo aggressively go out to bank low-income clients. Great news? Yes, definitely, but there are still more than 78% percent of the population without access to finance, and 54 percent live below the poverty line.

Already in 2005, the government decided to change this and promote rural and pro-poor outreach through adjustments of the regulatory environment, promoting customer protection and transparency, and lastly the use of “cajeros corresponsales” or banking agents to work on behalf of banks (Circular B-2147-2005). Interestingly, the Peruvian state-bank “Banco de la Nacion” with the largest coverage in the country (in 70% of all municipalities, Banco de la Nacion is the only financial service provider) can work as banking agent for all Peruvian banks: somebody living in “la selva” (descriptive for the Peruvians as “very remote”) could pay back their Scotiabank loan at the local Banco de la Nacion branch.Since 2005, more than 10 commercial banks and finance companies have launched more than 2,100 banking agents and other low-cost channels. Infrastructure has been most often proprietary, i.e.,ATM networks, or POS networks have been kept exclusive to As a first step, these banks have primarily looked at providing a complementary channel to their existing clients, but with different strategies:

* Interbank, with currently the largest network, has contracted IQcorp, a local POS network to install the point-of-sale devices and take care of the technology platform.
* Banco de Crédito has placed its “Agente BCP” or “vía BCP” primarily in independent pharmacies, small supermarkets and other shops.
* Scotiabank has currently 205 points, but plans to grow the network to 850 until the end of 2007. In addition to banking agents, Scotiabank has also launched a range of mini-branches in large retail chains to provide consumer credit.
* Banco Del Trabajo has mini-branches in retail chains like Inkafarma or Metro. Two to three bank representatives do the credit assessment on-side and even if you do not have a credit history yet, you can count on a S./200 (US$63) loan directly given to you on a private label credit card. Banco de Trabajo also has a network of banking agents.
* Mibanco with currently around 350,000 client is a microfinance bank about to launch its agent network. The institution converted from an NGO in 1998 and has still been growing rapidly while also keeping high portfolio quality (2.85 PAR > 30 days).

Competition among these institutions is fearce. Not only in terms of clients, but also in terms of personal (Mibanco has lost around 10 staff to other banks since the beginning of the year.) Rather than competing for clients in urban areas, many banks now think about branching out. Banking agents will be a good way to support this outreach.

But it has to be seen if banks will apply the more Brazilian model, i.e., using stores and smaller chains as banking agents, or if banks go with the outreach model a la Mexico through partnering with large retail chains to set up full branches.

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