Microfinance meets the market

Robert Cull, Asli Demirguc-Kunt and Jonathan Morduch

A chapter in Moving Beyond Storytelling: Emerging Research in Microfinance, 2009, pp 1-30 from Emerald Group Publishing Limited

Abstract: In April 2007, Banco Compartamos of Mexico held a public offering of its stock in which insiders sold 30 percent of their holdings. The sale was over-subscribed by 13 times, and Compartamos was soon worth $1.6 billion (for details of the story, seeRosenberg, 2007;Malkin, 2008;Accion International, 2007). A month before the offering,the Economist (2007)had written: “Compartamos may not be the biggest bank in Mexico, but it could be the most important.” Compartamos’ claim to importance stems from its clients – not from their elite status, but from the opposite. The bank describes them as low-income women, taking loans to support tiny enterprises like neighborhood shops or tortilla-making businesses. The loans the women seek are small – typically hundreds of dollars rather than many thousands – and the bank requires no collateral. It is a version of “microfinance,” the idea associated with Muhammad Yunus and Grameen Bank of Bangladesh, winners of the 2006 Nobel Peace Prize. For Yunus, microfinance can unleash the productivity of cash-starved entrepreneurs and raise their incomes above poverty lines. It is a vision of poverty reduction that centers on self-help rather than direct income redistribution.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:eme:csefzz:s1569-3759(2009)0000092004

DOI: 10.1108/S1569-3759(2009)0000092004

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