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| Volume 5, Issue 1: July, 2007 | ||||
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E-news Main Page In This Issue Compartamos IPO: Microfinance Doing Good, or the Undoing of Microfinance?SAVE THE DATE! The Asia/Pacific Region Microcredit Summit 2008 Archived Issues Vol 5 Iss 1 Jul '07 E-News Information |
Remarks by María Otero, President & CEO, ACCION InternacionalEight years ago, when ACCION made its investment in Compartamos through its Gateway Fund, there was little or no private investor interest in microfinance. To build an operation from such modest roots to an IPO is a phenomenal accomplishment, and one that has provided financial access to over 600,000 Mexican entrepreneurs – more than 3 million if one factors in the multiplier for family impact. Compartamos has pursued two ambitious goals throughout this decade. One was to reach a million clients by 2008; another was to establish long-term viability by gaining full access to the formal financial system. The strategy they followed involved stockpiling earnings in order to fund portfolio growth and expansion. Most income was reinvested in the institution rather than paid out to shareholders – and it’s important to note that the IPO doesn’t change that; all retained earnings remain at the service of clients. Companies with limited access to financial markets (Compartamos, until very recently) must frequently rely on internally generated cash for growth. Successful MFIs often begin their life cycle by charging high rates because it’s expensive to make tiny loans to myriad, widely-dispersed clients. Over time, as we’ve seen, efficiency and competition increase, and rates begin to fall. That’s how the market works. ACCION, as a minority shareholder in Compartamos, has expressed many opinions in board discussions on interest rates and growth policy. In the final analysis, we stand behind the strategy they’ve adopted. Regardless, we take very seriously the issues raised by the IPO debate. The event has provoked a healthy discussion on what constitutes fair pricing, and the role of profits in the commercial model of microfinance. ACCION will continue to participate actively in the discussion of these issues. The individuals and non-profits who sold shares at the IPO risked their own scarce human and financial capital long before others believed in a commercial model for microfinance. That the global investment community chose to reward those shareholders with profits should be cause for celebration within the industry, for it proves that a rigorous approach to business and mission-driven microfinance can co-exist in mainstream financial markets. Read more on this topic in Accion’s news bulletin, Insight Next supportive comment: Damian Von Stauffenberg |