In Peru, small retailers, many of which are owned and run by women, are a critical source of employment and livelihoods, and often serve as social hubs in communities.
However, many operate on little more than a subsistence basis and are unable to respond to even the smallest income shocks. Moreover, lack of access to appropriate and affordable financial services limits their ability to secure investment for business growth and to protect themselves from setbacks and forces them to operate within the cash economy, leading to high transaction costs and risk of theft.
For Backus, our business in Peru, small retailers in Peru are an important product distribution channel. Over 96,000 small retailers play a role in Backus’ distribution chain, accounting for approximately 40% of product sales. The challenges small retailers face can lead to inefficiencies in Backus’ distribution chain, such as high cash handling costs and lack of sales growth.
Since 2012, Backus has collaborated with banks, microfinance institutions and government to increase small retailers’ access to financial services. The initiative has enabled retailers, who previously had no access to financial services, to access payment services and obtain loans with preferential terms through mobile phones. Banking infrastructure has also been established in rural areas and selected retailers were provided with technology that enabled them to become ‘mini-banks’, providing an additional source of income and a valuable service in local communities. In addition, Backus created an incentive program to encourage involvement in the initiative, offering access to micro insurance products with free health care services.
As a result, more than 6,800 retailers have received $38 million USD in loans, helping them increase revenues by around 16%. In addition, over 1,200 retailers have set up as “mini banks”, earning a total of $4.5 million USD in additional income. For Backus, cash collection levels have reduced from 60% to 30% of total transactions, saving Backus almost $2.3 million USD in cash handling expenses and helping reduce security risks.
Backus continues to focus on embedding financial inclusion in its strategy to support small retailers and in strengthening its collaboration with partners. As a next step, it is leading a group of large companies and the Bank Association to develop a new mobile banking platform that will enable retailers to perform mobile transactions with their clients and suppliers.