In April 2007, Compartamos, one of the largest microfinance companies in Mexico, made one of the coups of the year in the Mexican Stock Exchange. It placed nearly 30% of its shares up for initial public offer on the Mexican Stock Exchange, which brought US$468 million in capital. The issue was made three times, and the share price of Compartamos shot up 34% in the first day of trading.
The offering of Compartamos shares was a milestone for several reasons. First, it was the first incursion of a Latin American microfinance company into the public capital market, showing a probable path for other similar institutions. Secondly, it showed the market’s interest in this type of activity. And third, because it brought to the center of the debate whether the principle of maximizing profits that underlies the business world can--or should--apply to business with the poorest segments of the population. The success of Compartamos is supported in the high profitability that the microfinance company has shown in recent years, as a result of the high interest rates that it charges on its loans and the low level of default, approximately 1% of its portfolio. For many, the time has come in the microfinance sector to moderate profitability by lowering those rates, something that may not be totally to the liking of Compartamos’ new shareholders.
Beyond the heated debate, the case of Compartamos is a clear sign of the maturity of microfinance in the work in general and Latin America in particular, a region that leads the world in developing this industry. It is an activity that was born from philanthropy, nourished on the expansion of non governmental organizations (NGOs) throughout the world, and came of age with the arrival of the new century. In this process, La Paz’s Maria Otero, president and CEO of Accion International, one of the main institutions in the world poised to expand financial services to the poorest sectors of the populations, has played a fundamental role.
Otero joined Accion in Honduras in 1986, when microfinance in Latin America was still in its embrionic phase. From there, she made a solid career that took her to the presidency of Accion in 2000, from where she has backed a model that gives sustainability to microfinance. Today, the majority of the 27 microfinanciers belonging to the Accion Network--in Latin America, Africa and the United States-- have evolved into the arena of institutions regulated by financial authorities the country where they operate, some of them even becoming banks.
The debate generated around Compartamos’ initial stock offering promises to continue. Microfinance is in fashion. With the favorable winds that have blown in the economies of a large part of emerging countries, plus the boom of funds sent back from emigrants, the phenomenon has taken on multimillion dollar investments. From Accion, Otero will have an essential role in helping to shape this growing activity, taking care that it does not lose sight of its fundamental role of helping the poor get out of poverty.
