MICROCAPITAL STORY: Banco Compartamos, Mexico’s Largest Microfinance Bank, Reports 33.7 Percent Increase in Net Income in 2007

Banco Compartamos, S.A., Mexico’s largest microfinance bank and a lightning rod in the debate regarding for-profit micro-lending, reported a significant year-over-year increase in net income for 2007, driven primarily by a rapid growth in clients that bolstered the company’s loan portfolio.

Net income for the year was MXN 877 million, equivalent to USD 81.5 million, a 33.7 percent increase from 2006. This accompanied a 36 percent increase in the bank’s active client base, to 838,574, and a 35.6 percent rise in the value of its loan portfolio, to MXN 4.2 billion (USD 389.2 million).

Compartamos also expanded its physical presence in Mexico, adding 65 new service offices throughout the country, for a total of 252, and hiring over a thousand new employees. This accounts for a 46 percent jump in operating expenses over prior year.

Compartamos’ stock closed at MXN 46.72 on the Mexican stock exchange BMV, down MXN 0.58, on Feb. 25, the day of the announcement. As reported by MicroCapital on Feb. 13, the company has seen steady declines in its share price since its peak last July, after a promising initial public offering (IPO) in April.

The bank has also been at the center of a controversy about the growing commercialization of micro-lending. Last June, Microcapital.org reported on an ongoing debate (part 1, part 2) about the IPO and its implications for microfinance. Even microfinance pioneer Muhammad Yunus recently spoke out, referring to practices such as charging high interest rates.

“Microcredit was created to fight the money lender, not to become the money lender,” said Yunus. Investors, however, contend that rates are decreasing, are lower than those available by other means, and are necessary to expand the availability of microfinance.

Banco Compartamos, based in Mexico City, was founded in 1990. Initially an issuer of credit to entrepreneurs, it began operating as a bank in 2006 so that it could offer its clients other products, including insurance and saving services. The bank’s assets total MXN 5.1 billion, equivalent to USD 474.4 million. Its return on assets is 17.19 percent and its debt-equity ratio is 123.33 percent. According to rating agency Standard & Poor’s, Compartamos’ most recent rating, from October 2007, is mxAA- long-term and mxA-1 short-term, with a Stable perspective. The long-term rating is up from the previous mxA+ rating.

By Stephen Son

Additional Resources:

Yahoo! Finance: “Banco Compartamos Reports 4Q07 Results”; Historical Prices for BANCO COMPART-O

Banco Compartamos: 4Q07 Results; “Standard & Poor’s sube a ‘mxAA-‘ la calificación de largo plazo de Banco Compartamos; la perspectiva es estable” (Spanish)

MicroCapital.org article, February 13, 2007: “Compartamos Windfall One Year Later”

MicroCapital.org article, June 18, 2007: “Further Extracts from the Microfinance Practice Group Debate on Compartamos IPO – Malcolm Harper”

MicroCapital.org article, June 19, 2007: “Further Extracts From the Microfinance Practice Group Debate on Compartamos IPO – Vineet Rai”

BusinessWeek: “Online Extra: Yunus Blasts Compartamos”