MICROCAPITAL STORY: Mexican Microfinance Institution, Financiera Independencia, Reports First Quarter Net Income of Ps. 117.2m (USD 8.9m)

Financiera Independencia, a Mexican microfinance bank, reported their first quarter 2009 Net Income of 117.2 million pesos (USD 8.9 million). This was a decrease of 40 percent on a year-to-year basis. Net Operating Revenue of 612.8 million pesos (USD 46.6 million) did not fall significantly over the same period (0.2 percent), however Interest Expense increased by 150 percent or 57 million pesos (USD 4.3 million) and the Provision for Loan Losses increased by 61 percent or 76.8 million pesos (USD 5.8 million).

Noel Gonzalez, Chief Executive Officer, announced that Independencia is focused on improving operating efficiencies and has implemented various measures to reduce operational and personnel expenditure. Over the past 12 months an expansion strategy has seen the opening of 37 new offices (5 in Q1 09) and an increase in the labor force by 1,433 people or 18.4 percent. The total number of offices at 31 March 2009 is 197 in 143 cities. However, the number of new office openings decreased along with a consolidation of the distribution network in Q109. The labor force also declined 9 percent on the previous quarter.

Return on Assets (ROA) for 1Q09 decreased to 8.7 percent compared with 20.2 percent in 1Q08 and 9.4 percent in 4Q08. Total Assets as at 31 March 2009 were 3,347 million pesos (USD 254 million). Return on Equity (ROE) for Independencia was 31.8 percent in the first quarter of 2009 compared with 36 percent in 1Q08 and 28.5 percent in 4Q08. ROE for 1Q09 and 4Q08 reflects a capital reduction which was announced on September 18, 2008 which resulted from HSBC’s divestment in Independencia.

Independencia provides loans to low-income urban clients. As at 31 March 2009 Independencia had 1,126,383 clients, an increase of 25.9 percent or 40,420 clients for the quarter. The total loan portfolio was 4,443.3 million pesos (USD 337.7 million) with an average client balance of 3,945 pesos (USD 300). The Non Performing Loan (NPL) ratio declined to 10.9 percent from 12.5 percent at the end of 2008.

On September 19, 2008 the Mexican Securities and Exchange Commission (CNBV) revised its general regulations for listed companies on the Mexican Stock Exchange. Independencia advises that it has now applied the Mexican Banking Accounting Principles for 2009 results and 2008 comparison results. Non performing loans are now recognized at 60 days past due as opposed to 90 days. The loan loss reserve calculation has also been changed resulting in a lower reserve. In 2012 listed companies will have to apply the International Financial Reporting Standards (IFRS).

MicroCapital published a two-part series Paper Wrap-Up entitled, “2008 Microscope on the Microfinance Business Environment in Latin America and the Caribbean (LAC).” For information on the state of the business environment for Microfinance in these regions refer to LAC (Part I) and LAC (Part 2). Part 2 summarizes the Mexican environment.

Financiera Independencia was founded in 1993 and listed on the Mexican Stock Exchange on November 1, 2007. They trade under the symbol ‘FINDEP’. Independencia also reports to the MIX Market, the microfinance information clearinghouse and its profile can be found here. Their report ratings, in Spanish, are also reported. Independencia received a disclosure rating of five out of five diamonds from the MIX Market. A five diamond rating indicates that an MFI has disclosed general information, two consecutive years of outreach and impact data, two consecutive years of financial data, two consecutive years of audited financial statements, as well as adjusted data such as ratings, evaluations, due diligence and other studies.

By Sally Levy, Research Assistant

Additional Resources:

Reuters: Financiera Independencia Reports 1Q09 Net Income of Ps. 117.2 Million with Loan Portfolio…

Press Release: Financiera Independencia Reports 4Q08 Loan Portfolio Growth of 33.5% and Net Income Up 6.4% YoY

World Bank: Mexico Adopts IFRS: a timely decision

MIX Market: Financiera Independencia