Monthly Archives: October 2010

Compartamos Banco Reports 3Q10 Results – 40% ROE, 2% NPL, and $39mm net income

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October 21, 2010

MEXICO CITY–(BUSINESS WIRE)– Banco Compartamos, S.A. I.B.M. (“Compartamos” or “the Bank”) (BMV: COMPART), the leading Mexican microfinance bank today announced its non-audited financial results for the third quarter ended September 30, 2010. All figures were prepared in accordance with the requirements of the Comisión Nacional Bancaria y de Valores (CNBV) and are expressed in nominal pesos.

Highlights for 3Q10

  • The number of active clients reached 1,751,821, a 23.1% increase compared to 3Q09.
  • The total loan portfolio reached Ps. 8,784 million, a 24.2% increase compared to 3Q09.
  • Net income reached Ps. 491 million, a 36.8% increase compared to 3Q09.
  • Capitalization Ratio stood at 44.8%, an improvement from the 41.6% reported in 3Q09.
  • ROAE was 40.9%, a decrease when compared to the 42.6% reported in 3Q09.
  • Non-performing loans decreased to 1.97% in 3Q10, compared to 2.26% in 3Q09.
  • The Company added 7 service offices, ending the quarter with 352 service offices in the network.
  • The total number of employees grew by 536 people, reaching 9,127 employees; 1,863 more than in 3Q09.
  • Efficiency ratio for 3Q10 was 51.3%, an improvement compared to the 55.0% reported in 3Q09.

Comments from the Chief Executive Officer

Mr. Fernando Alvarez Toca, Compartamos’ Chief Executive Officer, stated: “Compartamos continues to grow across its most important indicators; we grew our client base by 23.1% to over 1.7 million active clients, which resulted in a 24.2% growth in the loan portfolio. Additionally, interest income grew 22.5% to over Ps. 1.5 billion and net income rose over 36% for the quarter. Finally, and to better serve customers, we added 7 service offices and 536 employees, surpassing 9 thousand employees companywide.

Despite the rapid growth, our focus on asset quality has paid off. NPL’s decreased to 1.97%, a twelve-month low; this is a result of close customer loan monitoring as well as our commitment to prevent their over indebtedness. As has always been part of Compartamos’ strategy, efficiency continues to thrive. The efficiency ratio was 51.3%, down from 55.0% in 3Q09. The internal cost-control culture is now firmly in place and has enabled us to keep the level of cost increases at a slower pace than the actual growth experienced at the Bank.

Generating social value, Compartamos donated over Ps. 2 million during 3Q10 to various community initiatives, including: computer equipment, educational grants, financial literature and conferences, among others. We are proud to aid our local communities in upgrading the standard of life for its constituents and it remains a core part of our mission.”

Using Capitalism to Help the Poor – NYT

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Venture Capital

October 6, 2010, 2:42 am

Vinod Khosla, the billionaire venture capitalist and co-founder of Sun Microsystems, was already among the world’s richest men when he invested a few years ago in SKS Microfinance, a lender to poor women in India, Vikas Bajaj writes in The New York Times.

But the roaring success of SKS’s recent initial public stock offering in Mumbai has made him richer by about $117 million — money he says he plans to plow back into other ventures that aim to fight poverty while also trying to turn a profit.

And he says he wants to challenge other rich Indians to do more to help their country’s poor.

An Indian transplant to Silicon Valley, Mr. Khosla plans to start a venture capital fund to invest in companies that focus on the poor in India, Africa and elsewhere by providing services like health, energy and education.

By backing businesses that provide education loans or distribute solar panels in villages, he says, he wants to show that commercial entities can better help people in poverty than most nonprofit charitable organizations.

Microfinance becoming globally recognized, commercial viability improving

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Oct 5, 2010

Microfinance becoming globally recognized, commercial viability improving, Microscope says

Report by the Economist Intelligence Unit provides global ranking for business environment in microfinance

Microfinance is rapidly shifting from a niche product to a globally recognized form of finance, with technology allowing the industry to lend and offer financial services to low-income populations and entrepreneurs around the world, according to the report Global Microscope on the Microfinance Business Environment 2010.

Increasingly both providers and investors consider microfinance commercially viable in developing countries but regulatory and market gaps keep the industry from operating as well as it should, said the report prepared by the Economist Intelligence Unit (EIU).

The Global Microscope 2010 offers an in-depth analysis of the microfinance business environment in 54 countries for a second consecutive year. It is also the fourth yearly index to track conditions in the 21 countries of the Latin American and Caribbean region.

The Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank Group; CAF Development Bank of Latin America and the Netherlands Technical Assistance Trust Fund at the International Finance Corporation (IFC) have provided support for the study.

“Access to diverse financial services is critical to improving livelihoods and welfare of poor and low-income people. Yet much remains to be done in policy environments to advance financial inclusion for individuals and enterprises in a responsible way,” said HRH Princess Maxima of the Netherlands, U.N. Secretary General’s Special Advocate for Inclusive Finance for Development. “The Global Microscope identifies where countries have made improvements, and where not, and where we therefore should focus our efforts going forward.”

The index that underlies this report allows countries and regions to be compared across three broad categories: regulatory framework, institutional development and investment climate. Besides covering 21 Latin American and Caribbean countries, the index also looks into the microfinance business environment in 11 countries from Sub-Saharan Africa, five from South Asia, seven from East Asia, three from the Middle East and North Africa, and seven from Eastern Europe and Central Asia.

As home to the overall best and worst performer in this year’s index, Latin America and the Caribbean has the largest range of scores among the six regions: half of the ten top ranked countries were from the region as well as four of the 10 lowest ranked countries.

Peru, the Philippines, and Bolivia topped the ranking for a second consecutive year. Peru retained its position as the global leader, scoring 74.3 out of 100, similar to last year’s score.

The remaining top 10 nations come from Latin America (Ecuador, El Salvador and Colombia), South and East Asia (India and Pakistan) and Sub-Saharan Africa (Ghana and Kenya). Of the 54 countries included in the 2010 index, 29 improved their scores, 21 fell back, and four were unchanged.

“The Global Microscope supplies investors, lenders and donors with a comprehensive and comparable snapshot of each country’s microfinance sector,” said Vanesa Sanchez, project manager for the Microscope at the EIU. “Regulatory frameworks are relatively advanced, but countries still fall short of providing the optimal conditions for microfinance.”

For-Profit v Not-For-Profit Microfinance

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Below is the video of debate between Mohammed Yunus, founder of Grameen Bank and Vikram Akula, founder of SKS Microfinance at the Clinton Global Initiative conference which took place last Tuesday.

At 14:32 in the video, Vikram Akula tells a story about how he concluded that SKS Microfinance needed to bring in big private equity investors:

Before starting SKS Microfinance I actually worked for one of these small NGO microfinance institutions, basically as a loan officer. I would give out these small loans and see this tremendous impact that Professor Yunus has written about and shown the world. And what would happen is, women from more remote villages would come to us and say, “Can you start in our village?” And we’d always have to say no, it’s grant-run, so we don’t have funds, and we’d have to turn them away, and they’d walk away disappointed.

Now, on one particular day, a very poor woman—emaciated, torn sari, no chappals—she had clearly walked quite a distance to ask me the same question. And again I said, “We don’t have funds. We can’t come into your village.” But unlike the other women who simply walked away disappointed, she looked me in the eye and said something that I’ll never forget. She said, “Am I not poor too? Do I not deserve a chance to get my family out of poverty?”

Now, for me this was a jarring question because here I was thinking I’m doing something to help eradicate poverty. But this woman’s question basically put me in my place, basically said: Look, what are you doing if you’re only doing this in a handful of villages and not doing it in the next set of villages? It’s as if you’re sending one child to school and holding one back….How do you design microfinance in a way so that you never have to turn away a poor person who’s simply asking for an opportunity?

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