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 Business News | May 2008 
Mexican Microlender Sees Growth Despite US Slowdown
 Noel Randewich - Reuters
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Mexico City - Compartamos, which has become one of Mexico's most profitable banks by making tiny loans for family businesses, expects fast growth this year and says an expected U.S. slowdown could even help business.
Compartamos (COMPARTO.MX), whose $400 million stock market listing last year raised eyebrows among microlending traditionalists, will grow lending this year by 40 percent, co-Chief Executive Carlos Danel said on Tuesday.
"It's incredible to think that the most sophisticated investors - in London or in hedge funds - are investing in a company based on the reputation of the man out there on the corner selling chewing gum," said Danel, pointing to a busy street in front of a Compartamos branch in Mexico City.
Compartamos, which in Spanish means "let's share", has been criticized by Bangladeshi economics professor Muhammad Yunus, who received the Nobel Peace Prize for pioneering microlending as a non-profit method of creating self-employment and escaping poverty.
Critics say the bank's decision to go public last year moves too far from the goal of poverty reduction, the original purpose of microfinance organizations.
Danel counters that access to Wall Street makes infinitely more money available to low-income entrepreneurs than could ever be provided by non-profit organizations.
Compartamos served 60,000 clients as a non-profit organization over 10 years in the 1990s. Since becoming a private firm in 2000 it has increased its client base to 900,000 and expects to reach 1 million clients this year.
Net profit should climb 25 percent this year over the $84 million made in 2007, Danel said.
DOWNTURN MEANS CLIENTS
Mexico's mostly foreign big banks, led by Citigroup (C.N) and BBVA (BBVA.MC), focus on a small but growing middle class, although they are beginning to design consumer products for lower-income clients.
Compartamos' clients normally have one- or two-person businesses, such as selling clothing at a market stall. They typically borrow around $450, at a 75 percent interest rate, to buy supplies or capital, like a sewing machine or tables.
Compartamos' clients are mostly women, and four out of five of them take out new loans after paying back their first.
In small towns where it usually operates, Compartamos organizes clients into groups of about 20 people who already know each other and guarantee each other's loans.
Peer pressure within the neighborhood groups has helped keep Compartamos' non-performing loans at just 1.7 percent of the total, a healthier level than Mexico's big banks.
"Our clients have no collateral to leverage, but they can leverage their reputations," Danel said.
Compartamos does not see business suffering from an expected slowdown this year in Mexico's economy, hit by a slump in the United States. In 2001, the last time the economy contracted, Compartamos grew steadily because many people started small businesses to get by, Danel said.
"When there's a downturn, especially when the job market is down, our market grows. We have more clients," Danel said.
(Additional reporting by Armando Tovar, editing by Leslie Gevirtz) |
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