CHAVEZ Pushes Banks into Poor Barrios - Now this is what democracy looks like!

[magbana]

Chavez pushes Venezuela's banks into poor barrios
Tue Jun 17, 2008 9:27am EDT


By Brian Ellsworth

CARACAS, June 17 (Reuters) - Angel Caballero's experience in business administration may have helped get him a job with Venezuela's Banesco bank, but it was his knowledge of Caracas' poor barrios that the bank was really after.

The former steel industry worker manages $1.5 million of loans spread over 250 clients in some of the most impoverished areas of Caracas' west side, helping Banesco tap into one of Venezuela's fastest-growing lending markets.

"At first people were a little wary," said Caballero, who was raised in the Caracas barrio of Magallanes de Catia. "But once the loan is approved, people feel they are being taken into account and they are very responsible about paying."

Faced with galloping inflation and heavy regulation by the government of leftist President Hugo Chavez, Venezuela's banks are expanding their portfolios of small loans to low-income clients as they search for new business.

Venezuelans see banks as the institutions doing the most to improve the lives of citizens, according to a recent survey by pollster Datanalisis, despite Chavez's threats to nationalize banks as part of his self-described socialist revolution.

Though there are not yet statistics on the growth of these loans, analysts say they are expanding banks' client base while helping incorporate into the banking system the 60 percent of Venezuelans that still stuff their savings in sock drawers.

With housing and car loan markets saturated, clients such as sandal-maker Yair Pina have grown increasingly attractive.

He used a $325 loan to buy production materials such as rubber, which let him boost output so he could fill orders from upscale clothing stores across town.

"We used to have to go the bank, but now the bank goes out into the streets to look for clients," said Pina, a former taxi driver who makes women's sandals in a workshop in the poor neighborhood of Altavista.

NEW BANK CLIENTS

These efforts follow a trend of banks in Latin America seeking out millions of low-income clients traditionally excluded from the baking system.

In Mexico, Wal-Mart (WALMEXV.MX: Quote, Profile, Research, Stock Buzz)(WMT.N: Quote, Profile, Research, Stock Buzz) has created a bank to woo low income workers and compete against foreign banks such as Citigroup (C.N: Quote, Profile, Research, Stock Buzz).

Venezuela's community banks are required to lend to poor and middle class borrowers at the same rates.

"This is an excellent business opportunity for Venezuelan banks," said Jose Grasso of the financial group Softline Consultores.

The Chavez government has for years offered microloans for as little as $200, but borrowers complain bureaucracy slows loan approvals, and Softline statistics show overall delinquency rates at state banks are four times those of private banks.

Venezuelan banks including Banesco BBC.CR and Banco de Venezuela BVL.CR(SAN.MC: Quote, Profile, Research, Stock Buzz) have created small-loan divisions that search for credit-worthy clients in shack-lined hillside barrios, miles from Caracas' shiny corporate banking towers.

These loans let businesses avoid barrio loan sharks, known as "prestamistas," who lend money of dubious origin at usurious rates that can top 200 percent per year.

Receiving a loan usually involves opening an account, often the client's first, with the lender. Banks have also created mini-agencies in poor neighborhoods where clients can make loan payments or deposits to their personal accounts.

Banks' increased presence in shantytowns, the backbone of the Chavez's support base, could make the leftist firebrand think twice about nationalizing lenders as he threatened to do in 2007 during a takeover wave in the energy and telecom sectors.

While banks have benefited from Venezuela's economic growth of more than 8 percent last year on record oil prices, 23 percent inflation in 2007 complicated lending.

Under current regulations, banks cannot charge more than 19 percent on manufacturing loans or more than 14 percent for agricultural loans and must pay at least 15 percent on savings.

They are also required to devote a certain portion of their portfolios to sectors such as small business or agriculture.

Small loans helped Alfredo Jimenez, 40, who works with a cooperative of private bus drivers, obtain financing for drivers to upgrade vehicles and prompted many members of the association to open personal bank accounts.

"Before we had to put our cash under our mattresses, now we know that it's better to work with a bank," said Jimenez. (Editing by Tom Hals)


http://www.reuters.com/article/marketsNews/idUSN0537294320080617?pageNumber=3&virtualBrandChannel=0&sp=true

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[Judi Lynn]

1. Wow! This will take a while to set it, magbana. REVOLUTIONARY! Thank you. n/t