Lessons in Microfinance Downscaling:
The Case of Banco de la Empresa, S.A.
|
Mark Wenner
MARKW@iadb.org
Abstract
Few commercial banks have engaged in profitable microfinance
lending despite repeated attempts by donor agencies to entice their
entry. The case of Banco de la Empresa, a Latin American private
bank whose identity has been disguised in this publication, illustrates
how penetration of the microenterprise market segment could evolve.
As of December 19x11, this bank had total assets of approximately
US$50 million and a microfinance loan portfolio of approximately
US$4 million, which generated more than 50 percent of the bank’s net
earnings. Between 19x10 and x11, the bank accessed a line of credit
and subsidized technical assistance provided by the Inter-American
Development Bank to further build its microlending program. This
paper reviews the bank’s experience with microfinance, what its
motivations were for starting such a program, what adjustments it
made in operating procedures and what risks the program faced. The
main lessons learned from the experience are: (1) starting and
sustaining a microfinance program requires committed and visionary
leadership; (2) profit must be the principal motivation, not social image
enhancement; (3) successful microfinance operations require a
different set of operating procedures, extensive investments in
appropriate information technology, training, staff incentives, a wide
network of bank branch offices and a schedule of hours of operation
that are convenient for low income clients; (4) careful consideration
must be given to how to structure and organize a microfinance
program (e.g. as a fully integrated product, a division, or a subsidiary)
within a commercial bank; and (5) managers need to focus on
operational efficiency and delinquency control, not solely on profits,
because profits can mask problems, especially in a noncompetitive
environment.
Full Document
PDF Format - 172 kb
 Return to the Documents Section
Hari Srinivas - hsrinivas@gdrc.org
 Return to the Virtual Library on Microcredit
|