Conversations in Microfinance

The Compartamos IPO
On April 20^th 207, Banco Comparatmos issued an Initial Public Offering (IPO) on the Mexican Stock Exchange. In this IPO, the shareholders in Compartamos which include Accion International, the International Finance Corporation (IFC), Compartamos NGO and private Mexican investors, sold 29.9% of Compartamos stock raising a total sum of US$468 million. The IPO was 3 times over-subscribed and was widely considered a success representing the growing commercialization of microfinance. However, it also provoked debate about the commercial model of microfinance, touching on issues including Comparatmos’ high market valuation, the balance of socially motivated and profit maximizing shareholders and the relatively high interest rates collected by some MFIs. We have presented selected literature below.

Background to the IPO:
Mexican Microlending Bank Surges in Market Debut
Reuters, April 20, 2007

The Banco Compartamos Initial Public Offering
Accion Insight, June 2007
Accion, one of Compartamos’ shareholders, divested of half their 18.1% stake through the IPO. In this Insight, Accion presents an outline of the history of the bank, the IPO, the reasons it chose to reduce its exposure to the bank, the results of the IPO and its implications for Accion, Comparatmos, its clients and microfinance. This note also provides a preliminary interrogation of the relatively high interest rates charged by Compartamos.

Debates:
Accion Applauds Compartamos on its IPO
Accion Media Centre
Accion’s immediate press release, following the IPO

CGAP Reflections on Compartamos IPO
Richard Rosenburg, CGAP Consultant
In this focus note Richard Rosenburg argues that aid money granted to Compartamos by its initial shareholders has not flown to private investors. However, he finds that the most distressing issues highlighted by this IPO are that of past management decisions regarding the maintenance of relatively high interest rates and of balancing the expectations of its socially motivated and profit-maximizing shareholders in the future.

What would Leland Stanford Do?
Jonathan C. Lewis, CEO, MicroCredit Enterprises
In this speech at Stanford University, Jonathan Lewis uses the Compartamos IPO as a point of discussion to explore the dominant theories on microfinance: that of complete commercialization vs. partial commercialization. He argues that while commercialization is generally a useful approach for microfinance institutions, it must be balanced with the social obligations associated with serving the poor.

Cashing in on Extreme Poverty
Andrew Leonard, Salon.com
Provides a brief summary of the competing perspectives on the Compartamos IPO

Microfinance Draws Mega Players
Business Week, July 9^th, 2007
Provides an overview of the high returns that are sometimes sought by investors in microfinance

Key Issues in the Compartamos IPO
Chuck Waterfield, CEO, MFI Solutions LLCM

Microfinance’s Success Sets Off a Debate in Mexico
Elisabeth Malkin, NY Times, April 5, 2008