What's next for Chile's microfinance leader?

Friday, December 16, 2011

The microfinance market in Chile is not one of the most developed in the world, much less in Latin America, where countries like Peru and Bolivia are frequently cited as the examples to follow.

But the microfinance unit of Chilean state bank BancoEstado has increasingly gained fame as a leading and innovative company in the Latin American microfinance industry.

To find out how the unit, BancoEstado Microempresas, did this year and what its plans and goals are for 2012, BNamericas spoke to its general manager, María Soledad Ovando.


BNamericas: What were the most important achievements for you in 2011?

Ovando: This has been an exciting year. The last four months have made us really proud since we've surpassed our lending records every month, going above and beyond the challenging targets we'd set. This speaks to the tremendous commitment of every one of the company's employees.

All of this means that we're helping to make Chile a microenterprise power by 2020. How? We've increased the average loan amount by 25%, which means greater investments by our clients in equipment and working capital, while keeping our risk indicators under control. We're developing a large percentage of our operations with state guarantees, which makes financing easier for individuals who weren't previously served by the banking sector.

We've managed to increase the number of checking accounts in a segment of the market that normally doesn't use this product. And this has had a positive impact on the account holders' relationships and ability to negotiate with their suppliers, making them more competitive.

Finally, I'm very happy with how we've continued to make progress on providing mortgage and higher education loans, significantly improving the quality of life for our customers and their families.

BNamericas: When you close this year, how much growth are you expecting in client numbers and lending?

Ovando: At the end of December, we expect to reach a loan book of 584bn pesos [US$1.13bn], which is a 14% increase compared to 2010. In terms of number of clients, we're projecting 425,000, or 4% net growth, which is consistent with our 62% market share.

BNamericas: What are the main goals and plans for 2012?

Ovando: Our main goal is to increase the net volume of commercial loans by 4%, which means reaching a stock of 607bn pesos. Our main projects include: Increasing the nonfinancial features of our offerings, such as coordination with the development network for subsidies; guarantees; and training as well as optimizing our customer care model to improve service quality. On this point, we're tackling how to diversify our service channels and put emphasis on non face-to-face interactions, thus reducing service times.

BNamericas: What kind of growth are you expecting in terms of clients next year?

Ovando: In terms of clients, we're already close to 425,000, and we believe that it would be very healthy for other players to enter the industry, so our main focus won't be to increase the number of clients. Our challenge is to widen our product portfolio, incorporating products that have a direct impact on the competitiveness of micro entrepreneurs.

BNamericas: What will the major trends be in the microcredit sector in Chile next year?

Ovando: The example set by BancoEstado Microempresas will be followed in terms of relaxing credit requirements and decreasing service response times. There will be a focus on tried and tested sub-segments that represent an attractive market potential for private banks getting into this industry, such as established micro firms and owners of passenger transport vehicles, like taxis and school vans. I also believe that the sector is adding specialized attention as a critical variable in order to reproduce our service model.

About the company

BancoEstado is Chile's only state bank and is also one of the biggest lenders in the country.