A Case Study on Microfinance Interest Rates and Profits

On April 20, 2007, Banco Compartamos, a microfinance institution (MFI) that was launched in 1990 and originally funded by grants from various sources, including CGAP, completed a landmark initial public offering (IPO) of its stock. The IPO was 13 times oversubscribed and considered a huge success by any financial market standard.1 Pent-up demand caused the share price—representing 30 percent ownership in the bank—to surge 22 percent in the first day of trading. Demand was driven by the exceptional growth and profitability of Compartamos, a dearth of Mexican investments for emerging market portfolios, rarity value, strong management, and the appeal of microfinance.

Download Full PDF