The kind of insurance that’s NOT in the news

All of a sudden, insurance is a word I’m hearing a lot. Not only can I not open any US website without some sort of reference to the recent Supreme Court ruling, but I also just stared working on a project with the section of Compartamos that manages its microinsurance products. Fortunately for all of you, the focus of this blog will be on that sort of insurance, which is a kind that is not the subject of many news stories.

According to the National Survey of Occupation and Employment (ENOE), 64 million Mexicans belong to a socioeconomic sector that is most likely excluded from formal insurance products. Many of these people are unable to pay the high premiums that come with traditional policies, but an unexpected death in the family or flash flood can put the family in a very difficult situation. In a society where funeral rituals are such an important part of the culture, the absence of life insurance can force family members to borrow money or sell valued possessions in order to cover the funeral expense.

That’s where Microinsurance comes in. Currently, Compartamos offers life insurance to all 1.9 million clients of the Credito Mujer. The basic policy begins as soon as the clients receives their loan and, if the unfortunate does occur, the woman’s beneficiary is given MX$ 15,000 (approx. US$1,200) within 48 hours. This is enough to cover expenses for a simple burial and have some left over to give the family time to find a new source of income. Each client also has the option of purchasing additional insurance for as little as US$ 4, and 51% of all clients opt for this addition.

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.

MicroBusiness Award Winner Isabel Martinez Victoria poses with her loan officer at the 2012 Microbusiness Award Ceremony
Photo Credit: Compartamos Banco

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.

A First Day Unlike Any Other

I’ve just completed my first week as an Accion Ambassador at Compartamos Banco in Mexico City, and I realize that this is not going to be an ordinary summer internship. As I tackle the challenge of bringing financial services to low-income populations in Mexico, I’ll do my best to document my experiences in this blog.

I must admit that I was a bit nervous when I was asked to arrive to work at 6:30AM on my very first day. The purpose of this early morning call time was so that I could accompany staff on a field visit to Puebla, a town about 140km southeast of Mexico City. As soon as our van started to pull out of the sprawling capital, Compartamos member Vanessa gave us a presentation on the company’s philosophy, credit programs and business model. I tried my hardest to pay attention but, in my sleepy state, I was really just wondering what the day, and the rest of the summer, would have in store for me.

I didn’t have to wait long to find out. We arrived in the municipality of Tepeaca around 9:30AM, and the branch was bustling with activity. The loan officers were scurrying around organizing all the documents needed for their busy day in the field. Before the day was over, they would have to visit about six or seven different client groups in the rural areas surrounding the city.

Loan officers at Compartamos branch in Puebla, Mexico

Field Visit- Toluca

Compartiendo sueños: First Field Visit

At 8 am sharp we headed 20 km North to the city of Toluca, known popularly as Toluca ¨ La bella ¨. Nearby the city center we stopped to pick up Lupita, director of the Toluca Compartamos office. Very energetic, Lupita guided our driver through a dirt road that took us to where we had our first visit. We were scheduled to go see a disbursement meeting o ¨ desembolso¨ of a solidarity loan to a group of 21 women, called ¨Elirio¨, named after a typical Mexican flower. What is fascinating, explained Lupita, is to live every step of the lending process with them, from seeing all the creativity that goes into picking the correct name to growing with them and their families. Lupita told us how she is friends with almost all her clients and as the loan officer, she has become some sort of councilor or personal advisor to the group. Even though she studied to be a teacher, she said she loves to work as a loan officer because she teaches these women how to make the most out of their business; she encourages them and guides them through every step. She talked about these women as if they were her pupils and she was their mentor. Filled with pride, Lupita pointed out this was the 27^th  loan cycle working with these group (1 cycle =  4months). In what is approximately 8 years, Lupe has seen these women struggle, fight and succeed.

Grupo "Elirio

On our way to Toluca, we could see a couple of corn cultivations scattered around the semi-dessert landscape. The land was pretty arid and there was no sign of major agricultural activity.  Small businesses crowded the walkway and street vendors opened up their lungs to advertise their products. I asked Lupita what is the main productive activity in the zone and she answered with no hesitation “everything and anything”. Apparently, most women in Toluca dedicate their work to do many different things, ranging from ¨ peluches¨ or stuffed animals, tortillas, shoes, handcrafts, hats to even industrial waste management.  After driving 15 min into the small town, we finally arrived to the house of Rosa Isela , president of this group’s committee (each credit cycle the group must select a president , a secretary and a treasurer). With a humble smile, she greeted us and told us to feel at home. Soon after we got there, the rest of the women started arriving. Many of the women arrived with their kids, some with their daughters and others accompanied by friends. What was noticeable from all this was that there were no man around. Lupita explained to me that many women don’t tell their husbands about their loans and they try to keep their business activities as independent as possible. On the other hand, Lupita continued, when the husbands do know, many times they act as protection. On the weekly meetings, many husbands apparently strategically locate themselves  on the road to watch for possible assaults. For whatever reason, the disbursement meeting seemed more than a financial contract like a typical women gathering. Women shared about their everyday life, they cracked up jokes and told the latest gossip.

A Mexican Encounter

Nothing can be more unsettling than loosing your passport overseas. In today’s document hungry world, this can be a major calamity. Thankfully, my 24-hour experience as an undocumented immigrant trying to fly to Mexico had a happy ending.

After grasping the extent of my misfortune, calling frenetically every Lost & Found office in the Boston Metropolitan area and every Ecuadorian Consulate in Northeastern United States, my passport was finally returned to the TSA- Transportation Security Administration.

Putting the misadventure aside, I was excited to be ready and on my way to Mexico City.

As the plane was landing, I could see the large concentration of houses, commercial establishments, people, and above all, vehicles that settle around the urban center. No wonder why Mexico city is considered one of the most populated cities in the world -current population is 21.2 million people, the largest metropolitan area in the western hemisphere and the fifth largest agglomeration in the world (UN-World Urbanization Prospects)-

Mexico city from the plane

So there I was, entering a new world. Even though, I was born and raised in Ecuador and my mother tongue is Spanish, from several travels around the Southern Cone, I have come to learn that however similar, Latin American countries have distinct and very unique cultural traits.

As soon as I took a taxi, a very canny taxi driver instantly recognized my foreign accent and briefly introduced me to the common expressions used by locals. “Al ratito” (in a while) “No manches” (no way) Chaparrita (Miss) “Que Chido” (how cool)”¡Ni pedo! (Oh well)  “Oye Guey” (hey dude). I couldn’t ask for a better tourist guide, he was without doubt a connoisseur of the local culture. The more in depth we got in understanding Mexican customs, the more I felt the overall nationalistic spirit that characterizes a Mexican.

Without me even asking, Genaro, the savvy taxi diver, started telling me about the rapid demographic growth experienced in Mexico in the last 10 years. Genaro clearly explained how people have moved from every region to the center. According to him, the government decentralization policies, improvement of communication networks and infrastructure provisions have increased the economic and demographic influence of Mexico City.  He, being a Moreliano, (someone from Morelia) as he called himself, recounts with certain melancholy the story of his journey from Morelos to the city.  Genaro blames “Los Corporativos” for the massive migratory movement to the urban centers. Throughout the 1990’s and 2000’s large corporations moved their operations to Mexico, creating thousands of jobs and generating economic growth from FDI.

Genaro’s insight to the demographic changes and urbanization of Mexico City helped me understand the emergence of microfinance in Mexico as well as helped me put in context the rise of Compartamos . The upshot is: The huge growth of population clearly exceeded that capability for companies to offer jobs specially outside the industrial hubs; therefore people tried to perform productive activities, known as micro-businesses. Especially in Mexico, more people needed access to mainstream banking and credit facilities. Compartamos in its initial phases in 1990, operating as an NGO, started providing small working-capital loans to low-income individuals and business owners always with the mission of providing social, economic and human value.

After this short but very revealing encounter with Genaro,  the savvy Mexican, I am eager to go on the field and listen to the stories and the perspectives of actual microentrepreneurs. Stay posted for more stories and new perspectives!!!