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CASE STUDIES
CASE STUDIES
Enabling Growth: An Analysis of Compartamos’ Expansion
Financiera Compartamos S.A. de C.V., SFOL of
Mexico is among the largest, most profitable and
fastest growing microfinance institutions (MFIs) in
Latin America. Since its inception in 1990, Compartamos
has both led and bucked many industry
trends. Although traditional features such as joint
liability guarantees and village banks are essential
parts of its retail capacity, the MFI has consistently
remained on the cutting edge of commercial microfinance:
from its transformation into a regulated entity
and issuance of bonds to cross-selling and rapid
client expansion. This case study considers the
evolution of Compartamos through the lens of performance
analysis, examining how the MFI navigated
market and industry trends to reach its flagship
position in Latin American microfinance.
Mexico and Microfinance
Mexico has historically been considered part of the
“big country enigma,” the purported mystery of lagging
microfinance development in the largest countries
of Latin America. This enigma can partially be
explained by methodological failures in estimating
microfinance activity. Local cooperatives, for example,
are a critical source of financial services for
hundred of thousands of Mexicans⎯many of whom
may be poor⎯but remain overlooked in many estimations
of microfinance supply. Even when cooperatives
are included, however, financial service
provision falls far short of demand.
Jared Miller
The dimensions of demand for microfinance services
in Mexico are perhaps unrivaled in Latin
America. The country’s informal sector employs
millions, and certain densely populated regions offer
a highly attractive market for financial services.
In 2002, for example, Compartamos had almost
90,000 clients in just three states⎯ Chiapas, Oaxaca
and Puebla⎯ whose combined population was
greater than that of any Central American country,
but whose size is merely 70 percent that of Ecuador.
The lack of retail financial providers in Mexico,
especially in its poorer and southern regions, presents
challenges and opportunities for innovative
small-scale MFIs. A number of Mexico’s largest
financial institutions are largely foreign-owned and
their distant owners have historically been disinterested
in microfinance markets, with their large information
asymmetries and high transaction costs.
Against this backdrop of geographic and social imbalance
in supply and demand for financial services,
a pioneering microfinance provider seized the
opportunity for rapid growth. In the early 1990s,
Compartamos found that poor people could pay
higher interest rates and would repay loans more
reliably than the less poor. These two central insights
of microfinance, combined with the conditions
of a large, underdeveloped market, have been
the foundation of its exponential growth.
Figure 1: Compartamos’ outreach soars while remaining focused on same clientele
Nb of Borrowers
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
-
Avg. Balance/ Borrower
1,600
1995 1996 1997 1998 1999 2000 2001 2002
Number of Active Borrowers (Compartamos)
Number of Active Borrowers (LAC)
Average Loan Balance per Borrower (Compartamos)
Average Loan Balance per Borrower (LAC)
Source: MicroBanking Bulletin no. 10 data. LAC is Latin America and the Caribbean. Data for Compartamos shown for the years
1995−2002; LAC data shown only for 1999−2002. See the pages 59 to 66 for a list of institutions included in the LAC peer group.
1,400
1,200
1,000
800
600
400
200
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MICROBANKING BULLETIN, MARCH 2005 9