Why the Market Approach to Microfinance Can Work
When I mentioned to anyone in the microfinance field that I was going to be working with Banco Compartamos this summer, everyone seemed to have some sort of opinion about it. Some people hailed Compartamos as a true innovator in financial inclusion and others gave me a sort of blank stare and mumbled something incoherent about high interest rates and corporate profits. So, after a week and half of working here, I thought I’d add my humble opinion to the fray and give everyone a glimpse of what it’s actually like to work for the organization.
For those unfamiliar with the world of microfinance, Compartamos sparked a bit of a debate with their decision to go public in 2007. This moved away from the traditional microlending model done by non-profits, and allowed Compartamos to raise capital previously unavailable to them. Since then, the organization has grown exponentially, currently serving over 2.3 million clients with 439 local offices and over 14,000 employees.
In my opinion, the secret to Compartamos’ success and the reason why they prove that this model can work is that they seem to retain a genuine commitment to their initial core values. Most large corporations display their mission statement in the lobby or post their corporate values on their website, but few seem to take them as seriously as they do at Compartamos.
During my first week, I attended a day-long training for new employees which focused almost entirely on their corporate philosophy, which highlights the company’s commitment to generating social, economic and human value for all. At the core of the entire philosophy lies the “person”, which refers to both clients and employees alike and the bank’s commitment to both customer service and the professional and personal development of employees.
I’ve only been at the organization for a week and a half, but I’ve already seen countless examples of them truly embodying these values. Yesterday, I was lucky enough to attend the annual MicroBusiness Award ceremony, which honored 5 clients for their exceptional work in the areas of Service, Business, Family Participation, Social Responsibility and Production. Compartamos gathered some of the top business leaders in the country to choose the winners in each category. All are clients from humble backgrounds in various regions across Mexico, and Compartamos brought them into Mexico City to honor them with a beautiful award ceremony, a prize of Ps. 30,000 (USD $2,250), and dinner with some of the directors of the company.
What struck me most about the whole event was not the inspirational stories and solid business models of the winners (although, I admit to choking up more than once). I was actually most impressed by how both the winners and the Compartamos directors also took the time to really recognize the loan officers. Almost all of the loan officers are hired locally in the rural communities they serve and, for most of them, this is their first job. All of them were brought in to attend the event in Mexico City, and seemed to be equally honored and respected by the directors of the organization.
Everyone who works in the corporate office is required to spend at least one day a year in the field shadowing a loan officer. This includes speaking directly with clients, riding the rural public transportation between villages and observing operations first-hand. For this reason, everyone who I’ve spoken with in the organization has an incredible respect and admiration for both clients and field workers, and truly strives to place them at the center of the business. To me, this mutual respect from the top is what maintains Compartamos’s connection to its core values and drives employees to work for them every day.
There are some very valid criticisms to using the commercial approach to microfinance, but I think most of the danger lies in a company drifting away from its core mission. My personal experience with Compartamos has been very positive so far, and it’s easy to see why Compartamos was voted Best Company to Work for in Mexico in 2011 and 2012. I believe this commitment to the “person” is why all of their employees are motivated to finding innovative ways to create a more financially inclusive world. As long as Compartamos continues on this path, I think they show that the commercial model can work, and will continue to be a leader in the microfinance community.
Stay tuned for more insights into microfinance! Next week I start working on a project in the uncharted territory of microinsurance.
If you want to read more about the decision to go public in 2007, check out Accion Insight. You can also read co-founder Carols Danel’s thoughts on mission drift in his 2010 blog post for CGAP. If you want to hear more about the MicroBusiness Awards ceremony, just let me know if the comments and I’ll write more about it.