Lessons in Microfinance Downscaling:
The Case of Banco de la Empresa, S.A.

Mark Wenner


Few commercial banks have engaged in profitable microfinance lending despite repeated attempts by donor agencies to entice their entry. The case of Banco de la Empresa, a Latin American private bank whose identity has been disguised in this publication, illustrates how penetration of the microenterprise market segment could evolve. As of December 19x11, this bank had total assets of approximately US$50 million and a microfinance loan portfolio of approximately US$4 million, which generated more than 50 percent of the bank’s net earnings. Between 19x10 and x11, the bank accessed a line of credit and subsidized technical assistance provided by the Inter-American Development Bank to further build its microlending program. This paper reviews the bank’s experience with microfinance, what its motivations were for starting such a program, what adjustments it made in operating procedures and what risks the program faced. The main lessons learned from the experience are: (1) starting and sustaining a microfinance program requires committed and visionary leadership; (2) profit must be the principal motivation, not social image enhancement; (3) successful microfinance operations require a different set of operating procedures, extensive investments in appropriate information technology, training, staff incentives, a wide network of bank branch offices and a schedule of hours of operation that are convenient for low income clients; (4) careful consideration must be given to how to structure and organize a microfinance program (e.g. as a fully integrated product, a division, or a subsidiary) within a commercial bank; and (5) managers need to focus on operational efficiency and delinquency control, not solely on profits, because profits can mask problems, especially in a noncompetitive environment.

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