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ABSTRACT
The city of Rio de Janeiro has the highest proportion of people living in favelas in Brazil and their residents have very restricted access to financial services, often needing to commute to other neighborhoods to make simple transactions. Therefore, this research examines a fintech startup called Banco Maré, created to improve financial inclusion in the largest complex of favelas of Rio de Janeiro - Complexo da Maré. A model for ICT-mediated financial inclusion based on the Capability Approach was applied to evaluate this initiative in two favelas dominated by distinct criminal factions in the complex. The results suggest that the financial inclusion depends on the nature of criminal factions dominating same. The work, therefore, indicates that contexts where an institutional order that favors greater agency, empowerment and participation of residents prevail, can strongly affect ICT-based financial inclusion initiatives in favelas dominated by lawless organizations.
Disclosure statement
The authors of this article state that this work complies with the ‘Minimum Ethical Standards in ICTD/ICT4D Research’.Footnote42 For more information on this, see Dearden and Kleine (Citation2019).
Notes
1 Also known as slums or shantytowns.
2 It is important to highlight that financial inclusion can also bring unexpected undesirable results, as can be seen in the M-Pesa venture in Kenya (Bateman et al., Citation2019) and in the deployment of ICT-based branchless banks in Amazonia, Brazil (Diniz et al., Citation2012).
3 In this paper, the following definition was used for the criminal faction construct: “a continuing criminal enterprise that rationally works to profit from illicit activities; its continuing existence is maintained through the use of force, threats, monopoly control, and/or the corruption of public officials” (Albanese, Citation2000, p. 411). For more information on the origins of criminal factions in Rio de Janeiro, see Mattos (Citation2016).
4 According to Pereira (Citation2016, p. 21) and Rohling (Citation2015, p. 4), three criminal factions dominate the favelas located in Complexo da Maré, namely Militia Forces, Comando Vermelho (Red Command in English) and Terceiro Comando (Third Command in English). Rohling was a former Captain of the Brazilian Army, having participated in Operation São Francisco II, in 2014, in which the Brazilian Army occupied Complexo da Maré because of the Football Word Cup to be held that year in Brazil. More information can be found at http://www.ebrevistas.eb.mil.br/DMT/article/view/716/769 (in Portuguese).
5 Militias are clandestine paramilitary groups made up of current and former police officers which carry out both vigilante and organized crime activities. In the favelas where the authorities have effectively lost control, they act as de facto authorities, building infrastructure and enforcing their own brand of law and order.
6 2iDf model is an acronym in Portuguese for “Dynamic Info-Inclusion Model adapted for Financial Inclusion” (Joia & dos Santos, Citation2019).
7 All components of the model may change over time. Consequently, all of them must be considered as dynamic (Joia & dos Santos, Citation2019). In other words, there are actually no static components in the model. However, Joia and dos Santos (Citation2019) made a distinction between the components of the model located inside the triangle and the ones comprising the virtuous cycle of empowerment and participation. While the latter are considered to be dynamic by nature as they are enablers of the sustainment and growth of the ICT-based financial inclusion over time – thereby representing the individual “agency,” as well as “freedoms” and “powers” (Johnstone, 2007; Zheng & Stahl, Citation2011) – the former are responsible for leading to an adequate financial inclusion, being called “quasi-static components.”
8 In fact, the model was originally designed for government projects. However, the market orientation of Banco Maré demands a stronger business model to guarantee its operation.
9 Financial literacy was preferred to financial education in the model, since the former accurately describes the internal capabilities needed to use financial services, whereas the latter is related to the process of generating financial literacy (Atkinson & Messy, Citation2012).
10 For more information on this, see at Joia and dos Santos (Citation2019).
11 “Red Command” in English
12 Available at https://ictdethics.files.wordpress.com/2018/12/Minimum-Ethical-Standards-for-ICTD_ICT4D-Version-2.0.pdf (accessed on May 31, 2020).
13 More information on the demography of Complexo da Maré can be found at https://apublica.org/wp-content/uploads/2020/07/censomare-web-04mai.pdf.
14 The total population of the favelas includes children and the elderly, who are unlikely to have an account with Banco Maré.
15 This information can be found at http://bibliotecadigital.fgv.br/dspace/handle/10438/26087
16 See pictures at https://brasil.elpais.com/brasil/2014/03/30/album/1396205399_006677.html#foto_gal_1
17 To facilitate the identification of the interviewees’ statements, Roquete Pinto favela was called RP and Nova Holanda favela was referred to as NH.
18 Gated community is the group subject to a gatekeeping process (Barzilai-Nahon, 2018).
19 For more information on the domination of criminal factions in Complexo da Maré, see Magaloni et al. (Citation2020) and Sampaio (Citation2019).
20 More detailed information on the differences between militia and Comando Vermelho can be found at Duarte (2020).
21 All bank executives who were interviewed authorized the researchers to reveal their identities. However, in order to comply with the requirements of the ICTD/ICT4D Minimum Ethical Standards for Research, it was decided not to do so.
22 For a more detailed understanding of a banking correspondent operation, see Diniz (Citation2007) and Guimarães et al. (Citation2014).
23 There are many definitions for fintech (Leong & Sung, Citation2018; Schueffel, Citation2016) and most of them encompass the concept of banking correspondent (Blumberg, Citation2018).
24 See at https://www.sicoob.com.br/
25 With 150.4 million Internet users in 2021 - 71% of the population - Brazil has 66% of its active population on social media - URL: https://www.pagbrasil.com/pt-br/insights/brasil-os-numeros-do-relatorio-digital-in-2020/, in Portuguese (accessed on 06/04/2021).
31 US$ 0.07, as of October 10, 2020 (Source: https://www.x-rates.com/calculator/?from=BRL&to=USD&amount=0.40).
32 Banco Maré initially decided to offer these services after meetings with the board of residents’ associations of the two favelas and some invited residents, which took place before the bank had been implemented. The main reason for that was to build trust and promote a continuous engagement of the bank with the community and vice-versa, as suggested by Winschiers-Theophilus et al. (Citation2012, p. 2015).
33 A Portuguese word that means houses raised on piles over the surface of the soil or a body of water (a.k.a. stilt houses or pile dwellings in English). One palafita (PLF$ 1.00) is equal to one Brazilian Real (R$ 1.00) or US$ 0.20 in May 2021.
34 Gatos is Portuguese slang for a clandestine electrical connection to steal electrical energy.
35 A large Brazilian commercial bank (disguised name).
36 Registration number every citizen has in Brazil with the income tax department.
37 Although the bank was chosen to receive the grant, it had not yet received the funds at the time of the research.
38 According to Moe (Citation2005), political institutions may be structures of cooperation, but they may also be structures of power.
39 Available at http://shura.shu.ac.uk/18402/.
40 Adapted from the Internet Encyclopedia of Philosophy (available at https://www.iep.utm.edu/sen-cap/ on October 8, 2020).
41 From Joia and dos Santos (Citation2019, p. 850).
42 The Brazilian Institute of Geography and Statistics (IBGE), which has conducted censuses in Brazil since 1940, racially classifies the Brazilian population in five categories: White, Multiracial, Black, Yellow/Asian, and Indigenous. Indeed, the vast majority of research on racial dynamics in Brazil focuses on the black-to-white continuum. However, Brazil’s large-scale social surveys typically use three racial or color terms to capture the range of identifications on this continuum: white (branco), brown (pardo, or “mixed”), and black (preto) (Bailey et al., Citation2013). To make things simpler, only the classification of “White” and “Non-White” was adopted in this work.