Technical Note

Supply-Side

Assessment of

Financial Inclusion

in Paraguay

October 2014

DRAFT

2014 International Bank for Reconstruction and Development / The World Bank

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Acronyms

ADEFI: Asociacin de Financieras (Association of finance companies)

AFD: Agencia Financiera de Desarrollo

AML: Anti-Money Laundering

ANDE: Administracin Nacional de Electricidad (National Administration of Electricity)

ASOBAN: Asociacin de Bancos (Association of banks)

ATM: Automatic Teller Machine

BCP: Banco Central de Paraguay

BNF: Banco Nacional de Fomento

CAH: Crdito Agrcola de Habilitacin

CCT: Conditional Cash Transfer

CDA: Certificado de depsito de ahorro (Certificate of Deposit)

CENCOPAN: Central de Cooperativas del rea Nacional Ltda.

CNV: Comisin Nacional de Valores (Securities Commission)

CONATEL: Comisin Nacional de Telecomunicaciones (National Telecomunication Commission)

CONPACOOP: Confederacin Paraguaya de Cooperativas (Paraguayan Confederation of Cooperatives)

Co-op: Cooperative

DGEEC: Direccin General de Estadstica, Encuestas y Censos (National Statistic, Surveys, and Census Office)

DNCP: Direccin Nacional de Contrataciones Pblicas (National Procurement Office)

EIF: Encuesta sobre Inclusin Financiera (Survey on Financial Inclusion)

E-money: Electronic money

EMPES: Entidades de medio de pago electrnico (Companies that provide electronic payments)

EPH: Encuesta Permanente de Hogares (National Household Survey)

FAS: Financial Access Survey

FSAP: Financial Sector Assessment Program

G2P: Government to Person

IFC: International Finance Company

IMF: International Monetary Fund

INCOOP: Instituto Nacional de Cooperativismo (National Institute of Cooperativism)

INMU: Instituto Nacional de Mutuales (National Institute of Mutuals)

IPS: Instituto de Previsin Social (Paraguayan Social Security Institute)

KYC: Know Your Client

LAC: Latin America and the Caribbean

MFI: Microfinance Institution

MNO: Mobile Network Operator

MSMEs: Micro, Small and Medium Enterprises

NGO: Non-Governmental Organization

NPL: Non-performing loans

NSA: Nuestra Seora de la Asuncin

OTC: Over-the-counter

ROSCA: Rotating Savings and Credit Association

RUC: Registro nico del Contribuyente (Business registration)

SEPRELAD: Secretara de Prevencin de Lavado de Dinero o Bienes (Secretary for the Prevention of Money Laundering)

SME: Small and medium enterprises

Exchange rate: 1 USD=4,280 Gs.(September 2014)

Acknowledgements

This technical note was prepared by Celina Lee under the supervision of Jane Hwang. Overall guidance was provided by

Alfonso Garcia Mora (Sector Manager, Finance & Markets Group, Latin America and the Caribbean).

The team thanks Yoko Doi, David Grace, Maria Cristina Heisecke Paredes, Mariana Paredes, Doug Randall, Dante Mossi

and Javier Suarez for their substantive comments during various stages of this project. Korotoumou Ouattara, Gunhild Berg

and Leyla Castillo also provided invaluable insights to this technical note.

The team gratefully acknowledges the Paraguayan authorities, including the Banco Central, Ministerio de Hacienda, Instituto

Nacional de Cooperativismo and Secretara Tcnica de Planificacin, for their cooperation and collaboration throughout the

project.

Finally, the team is particularly appreciative of the financial sector community in Paraguay who generously gave their time

and views through extensive meetings and discussions to provide their information and perspective of the financial sector in

Paraguay.

Paraguay Supply Side Technical Note 2014

Table of Contents

Executive Summary ............................................................................................... 1

Introduction ......................................................................................................... 5

Landscape ........................................................................................................ 7

Savings ............................................................................................................. 33

Credit ............................................................................................................... 33

Payments and Transfers .................................................................................. 33

Insurance ......................................................................................................... 33

Summary of Recommendations ..................................................................... 33

References ........................................................................................................... 72

Annex A ................................................................................................................ 73

Annex B ............................................................................................................... 82

Annex C ............................................................................................................... 82

Paraguay Supply Side Technical Note 2014 | 1

Executive Summary

Note: Number of formal accounts held by cooperatives is the number of cooperative members. Not all members necessarily have accounts.

This technical note presents the findings of a supply-

side study of financial services in Paraguay. This note,

together with two other technical notes (on the demand-

side and on the legal-side), will help inform the

Paraguayan national financial inclusion strategy. This

study covers the current status of financial sector overall,

products and services (savings, credit, payments, and

1 Throughout this note, unless otherwise noted, banks or the banking sector refers to both banks and finance companies as a general category.

insurance), and service providers, focusing mostly on

formal providers, and to a lesser extent, semi-formal and

informal service providers.

The Paraguayan financial sector has experienced

continued growth in recent years. Outstanding bank

(and finance company1) loans represent 39% of GDP in

2014, up from 12% in 20042. Bank deposits represent

2 Source: Current data from BCP, based on current performing loans as of April 2014 and 2013 GDP. 2004 data from International Monetary Fund

Paraguay Supply Side Technical Note 2014

| 2

42.6% of GDP in 2014, up from 24% in 2004.3 There are

208 bank deposit accounts and 202 bank borrowers per

1,000 adults4. There are 10.25 bank branches and 23.31

bank ATMs per 100,000 adults.5 Outstanding cooperative

loans represent 8% of GDP6. Cooperative deposits

represent 6% of GDP7. There are 291 members of savings

and credit cooperatives per 1,000 adults8.

There is a diverse set of entities providing financial

services in Paraguay. The formal financial institutions

are banks, finance companies and cooperatives with

savings and credit as their main activity. Semi-formal is

defined as companies that are properly authorized to

conduct business, but are not actively supervised from a

financial perspective. Semi-formal players include casas

de credito, prepaid medicine, etc. Informal players are

those that are not legally recognized as any type of

business or organization. While anecdotal evidence

suggests that the semi-formal and informal sectors are in

fact playing a consequential role in Paraguay, this

technical note does not concentrate much on them mainly

because data on the size and impact of this sector is still

limited. More in-depth research in this area would be

valuable.

There are 16 banks, 12 finance companies, and 330

cooperatives whose primary business is saving and

credit, and an additional 120 other cooperatives that

provides financial services as a secondary activity

operating in the country. Cooperatives hold

approx