Compartamos plans to lower APR to 77% by end-2008

Wednesday, August 20, 2008

Mexican microfinance bank Compartamos is planning to lower its annual percentage rate (APR), the one-year rate that is charged for borrowing, by 300 basis points to 77% from today's 80%, the bank spokesperson confirmed to BNamericas.

The bank's goal for its APR is unaffected by the recent hike in the country's key interest rate. Last week, Mexico's central bank raised the benchmark interest rate 25 basis points to 8.25% for the third straight month.

Compartamos, Mexico's most profitable bank, has been widely criticized for charging high interest rates on microloans to low-income people, resulting in high profitability indicators.

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The Mexican microlender posted a ROE of 43.9% in 2007, the highest among the country's commercial banks and more than double the system average's 19.9%, banking regulator CNBV statistics show.

The spokesperson said Compartamos has been working on lowering its interest rates, which were much higher some years ago.

Commenting on press reports indicating Compartamos is open to be bought by financial institutions, the spokesperson said the bank has no plans to sell its operations.

Banco Compartamos posted net profits of 500mn pesos (US$48.7mn) for the first half, a 14% rise on the same period last year.

The bank's ROE for the half was 39.2%, down from 50.5% in 1H07, according to the institution's latest financial statements.