People disadvantaged in this case
In Mexico, the poor performance of the agricultural development banks and the economic crisis of the 1990s contributed to the current grave lack of formal financial services available in rural areas. According to some estimates, only 5% of the rural population currently has access to these services.  While an array of government agencies and programs operate in the field of rural finance, their focus is on credit and/or credit-related products for organized farmers, with an emphasis on agricultural activities.  Some limited government-sponsored microcredit programs also exist but are mostly unsustainable and susceptible to political manipulation.  Neither option is truly demand-driven, nor do they seek to provide banking services to the population through sustainable, member-owned financial intermediaries. As in many other parts of the world, the rural poor are not seen as a potential or interesting market for formal banking services because of their marginalized condition, geographically disparate locations (they sometimes have to travel a whole day to save five dollars in a bank), lack of conventional collateral, and low level of education. As a result of this, they cannot keep their money in a protected place and instead keep the money in their homes. There it is vulnerable to home invasions, which happens after payday on a regular base. Alternative savings like investing in animals is tricky, because they can die and loose their value. Local savers are no attractive option, for they charge low interest rates. Either way, the result for the poor and disadvantaged is a loss of savings and no structural improvement of their financial situation.

How the innovation improved access
The Ministry of Agriculture in Mexico launched the Rural Microfinance Technical Assistance Project (PATMIR) in 2001.  Taking advantage of the relative macroeconomic stability in the country, as well as a new regulatory framework for “popular financial institutions,” PATMIR was designed to provide highly-specialized technical assistance to selected financial intermediaries that were willing and able to tailor banking services to the various market segments of the rural poor while complying with regulatory requirements. PATMIR basically employed a two-market strategy: a government initiative promoting private services. Popular financial institutions – also known as cooperatives – constituted a good ally for this purpose because they are member-owned and have a long-standing commitment to working with low-income populations. Cooperatives combine a social perspective with a business perspective.
Since its inception in 2001, PATMIR’s results-oriented strategy has succeeded in becoming an important catalyst in the development, consolidation and expansion of popular banking services in selected marginal rural markets of the country. The project’s innovators took great care in designing the project; defining its goals, objectives and implementation strategies; selecting target populations, specialized technical assistance providers and participating financial intermediaries; and monitoring project performance throughout. PATMIR’s cornerstone policies include moving away from credit provision and towards savings-based integrated financial service, while demanding strict quality control and high performance standards from participating intermediary institutions. PATMIR has instigated two kinds of competitions: a competition between different technical assistance providers, and competition between local cooperatives. The result is that there now is a market for people’s savings. By tailoring products to the needs of the economically disadvantaged, and by subsidizing financial institutions to encourage them to provide services to the rural poor, PATMIR has begun giving the rural poor in Mexico access to sustainable, high quality banking services.

Obstacles encountered
The obstacles encountered by PATMIR were twofold.  First, providing financial services to marginal populations in Mexico meant overcoming long-standing poverty, weak institutional capacity and low levels of education amongst staff members.  To meet these challenges, innovators had to adapt products and services to the needs of the program’s beneficiaries while using technologies to generate sustainability and efficiency among financial intermediary programs. They designed tailor-made and continuous training programs for staff, adapted to the needs and maturity levels of each intermediary organization. Whereas many cases deal with overregulation, PATMIR had to deal with under regulation. The cooperatives had an informal status and although people’s savings are safer now, more regulation is needed in order to turn the cooperatives into fully reliable and durable institutions.
As a second obstacle, PATMIR encountered problems with internal bureaucracy that sometimes delayed disbursement of subsidies for branch expansion.  The Ministry’s internal budget dynamics are slow, and have no mechanisms for rushing service. This problem is still being managed, and will be addressed directly in Phase II of the Project, to be implemented next year.

The results of the innovation
On a broad level a paradigm shift took place from the idea that poor people cannot save money to the idea that they can. Creating cooperatives proved very successful in implementing this idea. There is now a financial market in poor rural areas. There is now agreement over the fact that poor people can save and will do so when given the opportunity.
PATMIR’s target populations are communities of less than 10,000 inhabitants within municipalities determined to be of very high, high and medium marginality levels in 10 states, nine of which are the poorest in the country. The regions were chosen from another ongoing Ministry project (the Marginal Areas Rural Development Project), which receives World Bank credit. By June 2007, PATMIR-supported financial intermediaries were serving 249,490 people, of whom 173,208 are new users and 76,282 are long-term users receiving new and improved services through revamped branches. Of PATMIR’s beneficiaries, 57% are women and 28% are indigenous peoples.
Some 29,000,000 people live in communities of less than 10,000 inhabitants in municipalities of very high, high and medium marginality levels in Mexico. The economically active population (EAP) is calculated to be around 8,700,000 in these communities.  Through PATMIR, we are currently serving an estimated 2.5% of the EAP and expect to close Phase I of the project serving 275,000 members/users, who will constitute 2.9% of the EAP.  During the proposed Phase II of the Project (2008-2012), the objective is to increase this figure to an accumulated 6.2-8.2% of the EAP in communities of less than 15,000 inhabitants nationwide, in the same types of municipality marginality levels.