Bradesco and Banco do Brasil Create a ‘New Bank’ for The Lower Income Class


Brazilian media has announced the possible creation of a bank targeting the low income population of the country to provide them with access to the banking system.

The initiative comes from two banks, Bradesco and Banco do Brasil. Both banks are expecting the approval from the Central Bank of Brazil in order to operate a new bank which will focus on low-income earners. The new institution is likely to start operating in 2016 and although it hasn’t been given a name yet, will probably go by the name of Elo.

Nearly R$1bn in loans will initially be made available to customers, as will the use of cards via the financial Ibi Promotora, which is controlled by the two banks.

Bradesco and Banco do Brasil have been working together since 2011, and have launched a number of joint initiatives and companies. They already partner with Alelo for benefits cards and prepaid cards; Movera for micro-credit; Stelo for electronic payments; Livelo for loyalty programmes, and Ibi for financial services.

The partnership’s shareholdings are run and held through Elo Participações, which was specifically created in 2011 as a joint venture between the two banks. Bradesco owns 50.01% of Elo Participações and Banco do Brasil 49.99%.

The new bank will target around 160 million people who earn up to 3 minimum wages (R$2,364). Many of this section of the population do not have bank accounts, but, research has proven, there is a demand for credit from this group. Of the 56 million people who obtained credit in 2014, some 34 million were from this low-income group.

The bank will also distribute to its customers credit and pre-paid cards. Loans will be made available via the cards.

Regardless of the potential, this segment of the population represents the highest ratio of Non-Performing Loans (NPL). It’s because of this, that this new bank will have a different lending model to those of the current financial institutions.

Instead, the loans will be given at a lower value, which can be increased as the client demonstrates greater financial strength.

Both Bradesco and Banco do Brasil have been waiting for three years for the approval from the Central Bank, but sources linked to the case claim that the project is in its final phase.

Only Bradesco and Banco do Brasil, through their official media press, will confirm the approval given by the Central Bank, as well as the announcement of this new project.

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Reference: ABECS