From One Computer to Biggest Microfinance Bank in Bolivia
By Franz Chávez
LA PAZ, Jul 4, 2011 (IPS) - A non-governmental organisation set up by five women 25 years ago in Bolivia gave birth to what is now the largest microcredit bank in the country, catering to those otherwise marginalised from the financial system.
The Banco FIE S.A. began its history as a small microfinance NGO in a modest office in the city of La Paz, with just one computer. From these humble origins emerged a new system for providing assistance to small productive units, offering microloans as small as 13 dollars at the bank's 150 branches around the country – nearly double the number of offices of the second-largest microfinance bank in the country.
"We developed a credit technology of our own. The first customer registrations were done by hand," the institution's general manager Elizabeth Nava, one of the pioneers of microfinance in Bolivia, told IPS. "This is a bank that was created with sheer hard work and dedication."
Last year, the Banco FIE won the Inter-American Development Bank award for best practices in social performance for its business outreach to segments of the population that traditionally have no access to the financial system.
Nava spoke with IPS at an office set in a bustling commercial area where hundreds of food vendors, farmers and craftspeople struggle for a small space to display their wares on roughly constructed stands or even just a sheet of plastic stretched out on the asphalt.
The history of the bank dates back to a quarter century ago, when the Centre for the Development of Economic Initiatives (FIE) set out in search of that army of potential small businesspeople, including many of the workers laid off as part of a draconian structural adjustment programme in an economy facing runaway inflation of 25,000 percent a year.
In 2010, FIE became a bank. Its files still record the smallest loan granted, of just 13 dollars, as well as the largest, 1.2 million dollars – only two of the 825,884 loans awarded since the organisation was founded.
Nava says her original idea of recognising women as generators of opportunities, and as having an innate ability to negotiate prices and analyse market demand and adapt the offer of food or other goods to the requirements of the public has been confirmed by the bank's experience. Today, 55 percent of Banco FIE's clients are women.
Family businesses specialised in making clothing, carpentry or other areas gave men the leading role in production while playing down the contribution of women who marketed and sold the products, managed the money and kept up-to-date on market trends, Nava said.
The economic activities focused on by the microfinance institution start out with seed capital of as little as 10 dollars, and the families involved are unfamiliar with complex tools for calculating their income or projecting sales, profits or payment capacity.
While the traditional banking system excluded this segment of the population due partly to the difficulty in assessing creditworthiness, the staff at Banco FIE recognised the opportunity to create a very simple credit assessment model, the bank's assistant national credit manager, Óscar Vedia, told IPS.
To illustrate, he cited the example of assessing the creditworthiness of a small family-run neighbourhood store. The assessor puts especially high value on the experience of the shopkeeper, who knows which food products are in high demand and sell fast, such as soft drinks, bread, sugar, rice and candy.
The location of the small business is also taken into account, and with this information the assessor produces graphs showing income levels over the course of one week and one month, to illustrate the sales cycle. To that is added the business's transportation costs and other expenses.
And because it is a family business, household expenditure like transportation, education, utilities and rent are included in the assessment to provide a complete picture, Vedia explained.
"We do everything possible to grant the loan, and we offer advice instead of simply saying 'no'," he said, smiling.
The casually dressed executive now runs the programme that has extended the bank's operations to Argentina and Haiti.
The Banco FIE has a net worth of 62.3 million dollars, and charges an annual interest rate of between 8.5 and 21 percent, which Vedia said are the lowest rates in the international microfinance market.