LatinFinance - November/December 2014 - 21

poverty. In the long run, we will have more clients," he says. "If the
microfinance company keeps focusing on very low income clients
and small ticket loans, when that client reaches a certain point, we
will be able to get that client."
Synergies - and differences
Closer tie-ups between commercial banks and microfinance units
can give the latter access to cheaper funding. The banks, in turn, can
benefit from microfinance's in-situ client visits, hands-on cash flow
analysis, and loans that fit the repayment capacity of each borrower.
Both can share each other's physical distribution infrastructure.
Due to similar synergies, the relationship with BCP helped
Edyficar grow its portfolio four times in five years, says Urteaga.
Edyficar's reach expanded through access to BCP's network of 5,000
banking agents in post office, stores and local businesses, he says.
Banorte's Valenzuela similarly says that commercial banks
and microfinance firms should do more to share infrastructure
and relationships. Bringing down funding costs for microfinance
institutions would lower clients' borrowing rates, he says: "These
ideas will have to be worked through."
But Valenzuela acknowledges that microfinance necessitates "a
particular way" as compared to other areas of banking: "We're not
that good in that market segment."
Van Stauffenberg at MicroRate says: "In the best cases, this is a
marvelous combination giving microfinance access to unlimited
funding and a commercial bank access to the microfinance market."
But in successful marriages between large commercial banks and
microfinance outfits, the banks "buy them, control them and let
them operate in their own style," says van Stauffenberg.

SERGIO NAVAJAS, INTER-AMERICAN DEVELOPMENT BANK

"MY FEAR IS THAT FOR VERY
LARGE BANKS, THESE MARKETS
REPRESENT A VERY SMALL
PORTION OF REVENUES. IF
TOMORROW THERE IS A SHOCK
AND THEY GET OUT, THE RISK IS
THEY ABANDON CLIENTS"
"Edyficar would not have been able to grow if it were integrated
into BCP - within the bank, you compete for resources with very
large units," agrees Urteaga.
That is not to say there are no other risks of such combinations,
however. "My fear is that for very large banks, these markets still
represent a very small portion of their revenues. If tomorrow there
is a shock and they get out, the risk is they abandon clients," says
Navajas at the IDB.
And if commercial banks - eager for bigger clients - encourage
newly acquired microfinance units to load clients with too
much debt too soon, it could be counter-productive, as recent
developments in the sector have demonstrated.
"We all lose with an over-indebted client," says Melo of FMM. "We
have to take more care in granting loans." LF
Additional reporting by Eduardo García and Dominic O'Neill

November/December 2014 - L ATINFINA NCE.COM 21
http://www.samsungseguridad.com http://www.samsungseguridad.com http://www.LATINFINANCE.COM
LatinFinance - November/December 2014

Table of Contents for the Digital Edition of LatinFinance - November/December 2014
