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2007-07-26 02:23:36

Agricultural credit card deals – myth or reality?

Have you ever thought of how many people next to you own a credit card? This figure might be reaching 100 percent as long as you are a living in an urban area of a developed country. Today many people can't imagine their life without a credit card. They can now be used to pay for any item or service you can possible think of. This modern financial tool has shown itself efficient and useful. However, over the past few years, people living in rural areas had no access to such thing.  Up until now, credit card deals were a privilege of an upper class citizens, but a change is about to happen

It has been a common practice to think that credit cards can only be used in areas where people have steady income. Recent program, launched in Costa Rica by Financiera Trisan, has shown the opposite. They were able to successfully introduce credit cards to agricultural producers, merchants and farmers and stay profitable with future plans to expand in Latin America.

One of the problems that Financiera Trisan has faced at the start was the fact that the targeted area for a new service was missing middle and upper class citizens of an industrialized city - the common cardholders. One of the characteristics of an agricultural area is that it is seasonal and has a very high level of poverty, which makes it difficult for certain banks to issue even secured credit cards. A research, conducted by Financiera Trisan has shown that even though most of the citizens of the targeted area did not have steady cash flow, their incomes could be predicted, thus minimizing the risks of issuing the credit. Furthermore, the higher costs of operation could be compensated by slightly higher interest rates.

Apart from the above limitations, Financiera Trisan has faced difficulties with physical, financial and legal infrastructure. In areas such as Costa Rica's highlands, postal service, telecommunications and roads are not that much developed as in industrialized areas. However, an effective service delivery mechanism was employed to overcome this and offer credit card deals.

Future expansion analysis has shown even better perspectives for Costa Rica's innovator. Even though a more massive intervention in the market would require greater investments - the result will be a larger volume of clients.  Infrastructural obstacles can be overcome by implementing even more innovative marketing ideas. Moreover, new types of credit cards can be issued to cover different groups of population. The future plans should not be limited to Costa Rica though. Given a sufficient basis for implementation, Financial Trisan can expand its service in other areas in Latin America.

One other thing that has been observed during the research is that controlling financial risks is crucial in rural lending. Like in a case with Costa Rica, most of the clients are poorly educated. Moreover, farmers and agricultural producers are highly prone to price changes, weather cataclysms and trade restrictions. However, once again, a proper, diversified risk management strategy has been employed, which sorted the clients into different groups of risks.

All in all, the credit card introduced by Financiera Trisan proved to be profitable and practicable. Given that the obstacles can't be evaded using ordinary methods, financial institutions should employ more creativity to come up with a new way to attract clients. Another important factor that played a distinctive role was the fact that the financial laws and regulations of Costa Rica were changed. In other words, as long as the government is ready to support the entrance of new financial institutions - the society will benefit. One last thing to note here is that after seeing the success of Financiera Trisan, new banks will enter the market resulting in healthy competition and therefore lower APRs and fees.

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