MFI EQUITY: WHO IS BUYING? WHO IS SELLING?
FOROMIC 2014 – Guayaquil, Ecuador
Pilar Ramirez
Founder of NGO FIE in Bolivia, small individual
shareholder of Banco FIE SA.
INTRODUCTION
30 yrs of microfinance work in FIE in Bolivia, first as a microcredit non-profit
organization, now a full commercial Bank, as well as managing the first local
currency loan fund for microcredit institutions in our region, has given me the
rare opportunity to witness the growth of institutions in many countries,
experience a variety of credit methodologies, and live through our influence
on important changes in financial regulations.
This has also meant negotiating face to face with all the different types of
providers of financial resources, for our activities: i.e.
• very soft, long term loans (Small Loans Division at IDB),
• short term soft loans,
• “development aid” loans from investors requiring “put options exclusively
borne by the founding NGO (CAF), to
• for profit personal and institutional investors with social vocations, and
• investment funds looking for high returns.
Recent Trends and Its Implications
High Profitability was never the guiding force behind our efforts.
Access to loans and other financial services, for women and men of our
continent who, because of their economic, gender and/or ethnic origin, had
no access to the “formal financial institutions”, was the sole aim of the then
microfinance providers.
“Success” in:
• growth of MFIs,
• high repayment rates by loan clients,
• government policies facilitating the “private, commercial sector” (vis a vis
the public sector) as driving force of a country’s economic development,
• encouraged important financial sector reforms towards what was then
termed “mainstreaming microfinance”, or “the commercialization of
microfinance”.
• Where regulation allowed, in our region many former nonprofit micro-credit “programs” evolved into for-profit
microfinance companies and even banks. Examples are: Banco
Sol, Mi Banco, Banco ADOPEM, Bancamía, Banco D’Miro,
many Edpymes in Perú becoming Financieras, Financiera El
Comercio, etc.
• In the case of Banco FIE, S.A. the move was one with serious
concerns regarding “loss of vision and mission”, “having to
up-scale into no longer low-income so-called “informal
sector clients”, focusing on profitability rather than financial
inclusion, the main worries among the founders of the NGO.
•
Despite criticisms by Professor Yunus of Grameen Bank: “making profits from the
poor, is immoral”…. MFIs who performed under “capitalist tools” (many times
against our original convictions) provoked a competitive environment that:
 Improved internal efficiency in the MFIs and lowered interest rates to clients.
 Forced IMFs to include new services (more clients, new services, improved
distribution of costs)
 Gave reasonable profit levels, adequate to clients’ loan repayment capacities,
 Resulted in real “financial inclusion” of clients once considered “un-bankable”.
 Economic levels of clients improved (i.e. access to private education, better
housing conditions, rising social expectations, among others).
 Many clients moved to “manufacturing activities” such as clothing, which is
starting to replace the buying of second hand clothing from USA and Europe, “by
the poor”, as well as many other cheap goods being mass produced in China and
sold in our region.
CURRENT CONCERNS/NEW APPROACHES
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“Socially motivated” or “mission driven” investors with time-lines for exit. The
pressures of “need to sell” has shifted the focus of interest of investors towards
ROEs and ROAs, away from impact on MFI clients.
MFI staff, busy on “day to day financial performance results”, many times tied to
monthly salaries and other benefits, respond accordingly, and begin to forget
original goals of economic and social inclusion.
The already long-standing global financial crisis (2008 to today) influencing
investors and their decisions on where to invest., is stressing the known funds
making them announce the eminent need to sell their investments in MFIs.
MFI investors, Board Members and Management, also pressured on results, have
little time to access information and/or contact possible new “mission driven”
investors.
(A Timid Suggestion) Perhaps the Development Financial Institutions could
access this information, and share it?)
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As to the question Who is Buying/Who is Selling, my personal feeling is that now
we, in the region, need to look for local investors: individuals, successful local
companies, young professionals, etc. as supporters of our microfinance sector.
These citizens work and produce in our countries. They have seen the growth of
the MFI sector and its results. There is a new generation of entrepreneurial
energy in LAC that, given the right investment vehicles, can be the future
supporters of our endeavors, for the growth of our nations as a whole.
Thank You!