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