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Microfinance Break

Jan 1, 2005

Microfinance firms could grow more rapidly if only they could access financial markets. Mexico's Financiera Compartamos has engineered a bond deal that represents a significant advance in breaking down some existing barriers to the growth of these increasingly fashionable lenders.

Some 300,000 Mexican small businesses, most run by women, rely on micro-loans from Compartamos, an organization that does not disclose net income, but which boasts a 20% return on assets. Like many microfinance institutions (MFIs) in Latin America, however, Compartamos is registered in Mexico as a Sofol, or non-deposit taking financial institution. As such, it needs to look to investors and, ultimately, capital markets to provide growth.

The company's inability to tap the markets had prevented it from expanding its client base. Until July 2004, that is. That's when Compartamos issued MP190 million ($16.6 million) in...

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management