WHO’S WHO IN MICROFINANCE: Compartamos Banco

Compartamos Banco, the largest microfinance bank in Mexico in terms of client base, was founded in Mexico in 1990 as a faith-based non-governmental organization offering microcredit to small businesses. Compartamos steadily scaled up operations, becoming a for-profit entity in 2000 and a registered commercial bank in 2006. In April 2007, it made a USD 458 million initial public offering (IPO) on the New York (80 percent) and Mexican (20 percent) Stock Exchanges.

The IPO was 13 times oversubscribed and share prices surged from an initial offer of MXN 40 (USD 3.65) to MXN 53 (USD 4.84) on the first day of trading. Although successful, the IPO drew criticism due to the large profits it generated in an industry with a perceived social agenda. From the USD 458 million made in the IPO, private Mexican investors, including the bank’s top executives, collected USD 150 million.

A 2008 New York Times article, titled ‘Microfinance’s Success Sets Off a Debate in Mexico,’ claimed that, on average, Compartamos charges an annual interest rate of approximately 90 percent (including a 15 percent government tax), which is nearly 40 percent higher than the average interest rate charged by nonprofit microfinance institutions (MFIs) globally. A study produced by CGAP (Consultative Group to Assist the Poor), an independent policy and research center housed at the World Bank, estimated that 23.6 percent of Compartamos’s interest income went to profits. Critics contend that this constitutes over-charging those who can least afford it.

Proponents argue that by demonstrating the profitability of microfinance, Compartamos has helped more poor people by drawing in large amounts of investor capital. The International Finance Corporation (IFC), which held a 10.6 percent stake in Compartamos prior to its IPO, acknowledged the success of the bank in going public: “This transaction confirms the level of maturity of Mexican financial markets, and the growing awareness amongst investors of the potential of the microfinancing sector as regards profitability, impact on development and social responsibility,” said Mr Atul Mehta, IFC’s Director for Latin America and the Caribbean.

According to the MIX Market, the microfinance information clearinghouse, as of 2008, Compartamos had a gross loan portfolio of USD 414.5 million, 1.2 million active borrowers and total assets of USD 587.9 million. Its debt to equity ratio was 1.85, with a return on assets of 19.12 percent and a return on equity of 55.19 percent.

Compartamos currently offers five credit products. Crédito Mujer (Women Credit) is granted to women in groups of 12 to 50, with a solidarity guarantee, to be invested in their businesses. Crédito Adicional is granted to clients with Crédito Mujer who need an additional loan for their business. Crédito Mejora Tu Casa (Improve Your House Credit) is granted to women in Crédito Mujer who need financing for home improvements. Crédito Solidario (Solidarity Credit) is granted to groups of three to eight entrepreneur men and/or women with a solidarity guarantee. Compartamos also offers a life insurance product called Seguro de Vida, which provides an unspecified amount of free coverage to clients of Crédito Mujer. Clients may purchase additional modules to increase the total insured amount. Twenty-two percent of Crédito Mujer clients have bought one or more life insurance modules.

Mr Carlos Labarthe Costas serves as Member of the Board of Directors and Chief Executive Officer of Banco Compartamos SA, a position he has held since 1992. He has served as Member of the Executive Committee of CGAP for five years and as Chairman of the Board of Directors of Microfinance Network. Mr Labarthe Costas holds a degree in Industrial Engineering from Universidad Anahuac. He also studied Business and Microfinance at the Economic Institute, Harvard Business School and at Instituto Panamericano de Alta Direccion de Empresa (IPADE).

Mr Carlos Antonio Danel Cendoya serves as Member of the Board of Directors and Co-Chief Executive Officer of Banco Compartamos SA, a position he has held since 1996. He also serves as Member of the Board of Directors of Casanueva-Perez Holdings and Interproteccion. Mr Danel Cendoya holds a degree in Architecture from Universidad Iberoamericana and a Masters degree in Business Administration from Instituto Panamericano de Alta Direccion de Empresa (IPADE).

Mr Alvaro Rodriguez Arregui has served as Chairman of the Board of Directors of Banco Compartamos SA since April 2009. Before that, he was a Member of the Board of Directors. He also acts as Chairman of the Finance and Planning Committees within the company. In addition, he is Co-Founder and Managing Partner of IGNIA Partners, LLC, as well as Chairman of the Board of Directors of ACCION International. Mr Rodriguez Arregui holds a degree in Economics from Instituto Tecnologico Autonomo de Mexico and a degree from the Harvard Business School.

By: Stefanie Rubin, Research Assistant

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