Itaú Unibanco: banking the unbanked in Brazil and the value of understanding people's stories

By Eduardo Ferreira, Head of Inclusive Business at Itaú

Edilene owns a grocery store in Nova Iguaçu, a suburb of Rio de Janeiro, which employs four young women from the community and serves hundreds of clients every day. She is empowered to handle life’s challenges and grasp every opportunity that presents itself. But success has not come easily for Edilene when she set up shop 14 years ago with just R$400. While she didn’t lack courage, she was limited by access to financing, as is the case for millions of entrepreneurs in Brazil, Latin America’s biggest economy.

Enter Itaú Unibanco, Latin America’s biggest private bank. Edilene’s business started taking off after meeting Michele, a loan officer from Itaú Microcrédito, an initiative launched by the bank to offer microcredit and financial-literacy advice to low-income Brazilians. With Michele’s support, Edilene gained access to credit for expanding her store, refurbishing, buying supplies and accelerating her business’s growth. She is now in the process of formally registering her business and sees her store’s success as a critical component of her community’s move up the economic ladder.

As Edilene’s tale shows, the Itaú’s microcredit initiative relies on understanding people’s stories in order to improve their livelihoods. Although 85 percent of Brazilians live in cities, 40 percent remain excluded from traditional banking systems. Itaú Microcrédito, which began in 2003, aims to address the needs of urban communities in Brazil that lack access to traditional banking services. Itaú has established a team of over 100 employees offering microfinance and microinsurance products in urban São Paulo, Rio de Janeiro and Porto Alegre, which are home to 35.5 million people (18 percent of Brazil’s population). Approximately 60 percent of its microcredit clients are women like Edilene, who have an entrepreneurial spirit and are leading small enterprises.

What makes Itaú Microcrédito different is that the program approaches clients within their communities. By learning about its clients, Itaú develops products that fit their needs. A major contributor of the program’s success has been the introduction of loan officers into the microcredit process. In addition to gathering information on repayment capacity, and screening for risks and potential benefits that would not be evaluated in the traditional banking system, loan officers remain close to their clients’ everyday lives, communicating with them and effectively becoming mentors on the most effective use of their clients’ money.

Itaú’s microcredit team is constantly seeking innovative ways to understand the needs of its clients. One of the most efficient means it has found is to physically bring them inside the bank and hear their experiences – and needs – firsthand, which has been very inspiring for Itaú’s team. The microcredit team does not believe in imposing ideas on clients, but in listening to and understanding what clients believe is right for them. At the end of the day, banking is about people servicing people, and Itaú believes that reaching out to clients is the best way forward to inclusive business.

Since the microcredit initiative started in 2003, Itaú Microcrédito has seen its client base evolve, and has been evolving along with them. For example, the bank now offers microinsurance products designed to protect micro-entrepreneurs from risks in their daily working lives, and point-of-sale systems that assist them in adapting to the country’s rapidly growing use of credit cards. Acknowledging the need to share its knowledge, the Itaú team has partnered with second-tier microfinance institutions in order to maximize the impact of its financial products.

As demonstrated by Edilene’s story, the Itaú Microcrédito’s initiative’s success lies in its ability to relate to clients, understand their stories, adapt to their communities and bring them into the bank to provide feedback. Inclusion is at the heart of Itaú’s approach, and the Itaú Microcrédito team believes that, with the right approach, microfinance is an effective tool for economic and social inclusion, which in turn contributes to Brazil’s economic and social development.

Read more:

BCtA Case Study: Itaú Unibanco: Banking the unbanked in Brazil

This article was originally published on the Business Call to Action Guardian Sustainable Business Partner Zone; visit here>>

This blog is a part of our June 2015 series on the role of corporates in inclusive business. To view all the articles in this series click here.