Heleno Alves, 43, who makes and sells clothes in Fortaleza, Brazil, says he pays his eight employees in cash because they don’t have bank accounts.

Neither does a good chunk of Brazil’s expanding consumer class, much to the disappointment of the Central Bank of Brazil and the banking industry, both of which would like to yank money out from under mattresses and put it to work.

Brazil’s central bank is on a mission to take banking services to Brazilians like Mr. Alves. It wants to educate banking novices about how to use the financial system, but faces an uphill struggle. Mr. Alves himself rarely uses his own bank account, and only deposits money he doesn’t immediately need.

“I like to buy my things in cash,” says Mr. Alves. “It’s safer.”

That conflicts with the view of the experts, who say that banking is safer than walking around the streets with a month’s salary in your pocket. But Brazilians such as Mr. Alves struggle to understand how banks work and are reluctant to hand over their money.

“More than half of Brazilian workers get their salary in cash,” says Elvira Cruvinel Ferreira, head of the central bank’s financial-education department. “This isn’t safe. Just to walk home with that cash makes them a target for robbers.”

The Brazilian central bank estimates that some 53 million Brazilians, or about 40% of the total adult population, don’t have a bank account. Many live too far from a bank branch, which can be hard to find outside major urban centers.

Still, that’s not much under the 50% global average, according to the World Bank’s Global Financial Inclusion survey, funded by the Bill and Melinda Gates Foundation.

Brazil’s financial-inclusion effort means reaching out to people in the most far-flung areas of this U.S.-size country — territories covered by rain forest, savannah or desert-like land — as well as to poor families in urban areas where Brazil’s infamous social gap, albeit shrinking, is still at play.

As a result, an unusual feature has developed: there are a huge number of so-called banking agents such as lottery houses, where many Brazilians carry out basic banking services such as paying utility bills. These lottery houses are far more common in low-income neighborhoods than bank branches or ATMs. But in some ways they mean people feel they don’t need to use banks.

“Bank agents such as lottery parlors work as a replacement for costly bank branches and are widely available in most parts of Brazil,” says Caitlin Sanford, a researcher at Boston’s Bankable Frontier Association, a consulting group. But that’s not enough, says Ms. Sanford, and banking agents can’t replace branches, particularly in terms of service and security.

Some other parts of the developing world are looking to replicate Brazil’s banking agent model. Using more banking agents is something Abraão de Vasconcelos, governor of East Timor’s central bank, is trying to apply to his tiny Asian island nation of 1.2 million.

“Opening a bank branch in East Timor costs around $200,000,” Mr. Vasconcelos said, “but the clientele in rural areas isn’t big enough” to justify the investment, he said.

Mr. Vasconcelos, who was in Brazil last year for a three-day event on the financial inclusion held by the Brazilian central bank, said his institution has stepped in to direct the banking industry on the expansion of bank agents,  but the plan is yet to get off the drawing board.

The Central Bank of Brazil is giving away educational brochures with titles such as “What is money,” “What is a central bank,” “What are banks” and “The ghost of inflation.” It has also developed a smart-phone app called Calculadora do Cidadão (The Citizen’s Calculator) to help users calculate everything from how long it will take to pay off a loan to how much a given investment will return.

Ironically, though, as more people are brought into the financial system, many aren’t prepared to deal with loans, credit and investments.

“I’ve overused my first credit card,” said Mr. Alves as he packed up unsold t-shirts at his stand in a recent balmy evening in Fortaleza, as waves broke just 300 feet away. “I had to get a deal with the bank to clean up,” he said.

Now, he keeps his card safe at home, rather than dealing in the amazing new world of banking.  Read the article here.