Growing up in Mexico, I’ve seen first-hand the difficulties that low-income earners have in purchasing goods or getting financial services. These goods and services many times are even more expensive than in a developed country, and are therefore inaccessible to low-income earners. I’ve been thinking a lot on what I should write as my first essay on this blog, so finally I decided that I should write about the first Mexican business that comes to my mind that focuses on the BOP market: Banco Azteca and its retail unit Elektra.

Banco Azteca was launched in Mexico in 2002, and is the banking unit of Mexican specialty retailer Grupo Elektra; both companies are part of the larger Grupo Salinas. The entire Grupo Salinas targets low-income earners, and its success has shaped business practices in Mexico toward the BOP, and its model has been imitated by other retailers in Mexico such as Wal-Mart.

Banco Azteca has expanded since 2002 and apart from Mexico it is also operating in Panamá, Guatemala and Honduras; in 2008, it is expected to launch operations in El Salvador.

Grupo Elektra sells electronics at almost double the price that you would find in a retail store. The "advantage" of Elektra is that it offers its customers the opportunity to buy goods and pay for them over a period of 12 to 24 months in very small weekly payments, sometimes even as low as 50 Mexican pesos per week. On the one hand, it’s great because the people can have access to buying TVs and stereos, even iPods. The problem comes when the obligation of making monthly payments over 2 years becomes too burdensome for the consumer, especially when his/her income does not leave much room for contingency spending. When consumers are unable to make their monthly payments, the item under contract can be confiscated and the consumer loses the amounts already paid. Are BOP consumers being taken advantage of? In a way, yes. These practices could be considered predatory, especially since consumer protection laws are less stringent in Mexico than in the U.S. or Europe.

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