Compartamos was founded in 1990 to provide microfinance services to the Mexican population as employment generated by microenterprises outpaced job growth in the formal economy. It became “fully functional and self-sufficient in 1997,” and is now a Non Banking Financial Institution (Sociedad Financiera de Objeto Limitado). Compartamos is a member of the ACCION International and Microfinance Networks. Investors include the Accion Gateway Fund, the International Finance Corporation, Oikocredit, ProFund International, S.A., the Triodos Fair Share Fund and the Triodos-Doen Foundation. Annual figures last updated December 31st, 2004 on the MIX Market, an information clearinghouse for microfinance recognized as the standard by MicroCapital, stated Total Assets of $125,140,019, and a Gross Loan Portfolio of $101,023,790 distributed among of 309,637 Active Borrowers. Compartamos does not offer savings accounts. For the same 2003-2004 period the company posted a Debt / Equity Ratio of 154.63%, an ROA of 18.2% and Profit Margins of 40.44%. Further details about the deal are not publicly available.
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ACCION’s “Who Will Buy our Paper” Conference in NYC Highlights Bond Issues for Microfinance Investment
Microfinance Institutions (MFIs) around the globe are looking to national and international capital markets to fund their growth.
At a microfinance conference in
As the microfinance sector transforms from the segmented, non-profit market of 20 years ago into a more professional, profitable, transparent, and technologically-savvy industry, it is turning to capital markets to fuel growth, and investors are taking notice.
Since many MFIs lack banking licenses, they are unable to accept deposits, and must turn to commercial banks for funding. Because this route can be costly, some MFIs are exploring bond issuances. According to Fernando Alvarez Toca, chief financial officer of Mexico’s Financiera Compartamos, "Bonds provide us with cheaper funding…and we can use them to press our current lenders for better conditions."
For more information on this story, check out marketwatch.com.
Additional Resources
1) “Microfinance firms make tentative move into capital markets,” www.marketwatch.com , February 8, 2006
Recommended Reading on Commercialization in Microfinance
We recommend the following articles from the UN’s monthly publication with a focus on the private sector this month:
1. Featured Guest: Ms. Diana Taylor,
Q&A on the Commercialisation of Microfinance
2. A Commercial Future for Microfinance: Opportunities and Challenges
By MarÌÐa Otero, President & CEO, ACCION International
3. Commercial Banks and Microfinance: Evolving Models of Success
By Jennifer Isern, Lead Microfinance Specialist, CGAP and David Porteous,
Consultant
Hewlett-Packard Announces Open Source Software to Be Available to the Microfinance Industry
Last week, Hewlett-Packard (HP) and Accion International announced the global release of an elaborate software that will perform rural loan transaction over mobile phones. The Remote Transaction System (RTS) is a “cost-effective means of tracking loan information” that will soon have an open source aspect. The announcement culminates the collaborative efforts of HP and multiple microfinance entities working to develop the software.
Banking software tailored to microfinance of course exists, but there is no industry standard. The World Bank microfinance unit (CGAP) lists over 50 such applications on its website, 15 of which are reviewed. To date, however, no one has tried an open source approach. Because most of the world’s 10,000 microfinance institutions (MFIs) are unprofitable, the firms that make the software products for MFIs are under-funded and often subsidized themselves. Revenue has historically been insufficient to support a better product, leaving the microfinance industry in need of an efficient, standardized approach to banking software.
The RTS innovation will hopefully succeed on both accounts, allowing for the creation of an industry standard and also achieving a “breakthrough in the scale of microfinance services,” because only open source might be affordable for all those tiny, cash-strapped microfinance institutions out there.
Will this open source development create an industry standard? A standard is certainly needed. Banking software taken downstream to service microfinance is just too expensive to buy and maintain for most micro-lenders, while on the other hand, the new products from technology firms focused on microfinance are limited in the face of microfinance market challenges, namely varying language, regulation, maintenance (infrastructure is scarce) and of course, cost.
Might an open source solution be affordable? Establishing a standard will depend on how cost-effectively on-site technicians can manage the application. Open source is not by definition cheaper of course. It is all about execution.
Again and again in the emerging microfinance market we are left with the same conclusion: many of the pieces are in place for an asset class, now it is up to local talent to see it through.
Additional Resources1) HP News Release
2) More in depth article by the UN Capital Development Fund’s Microfinance Matters
3) Sevak Solutions, which holds the rights to the RTS technology and licenses these rights to interested parties
Bringing Microfinance Leaders to Harvard Business School
Harvard Business School (HBS), in collaboration with ACCION International, one of the world’s largest microfinance networks, will be launching the first Program on Strategic Leadership for Microfinance from April 17 through April 22, 2006. Industry leaders and executives from all over the world will network with one another and take classes from HBS faculty in the areas of business strategy and management. ACCION International will be posting applications on its website in July. Applicants must be fluent in English.
We applaud an effort that addresses the weak link in the microfinance value chain: local management talent.