Corporate Governance and Access to Finance - ESBG

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CASE STUDY 5:CAJAS MUNICIPALES DE AHORRO Y CRÉDITO (CMAC) IN PERUIntroductionWith 20-25 years of experience, CMAC are now consolidated institutionsin the Peruvian financial landscape. They withstood very serious shocks andchallenges: the hyperinflation in the late 80s and early 90s, the privatisationsin the 90s, the Asian crisis and its aftermath in the Latin American regionand, more recently, the 2009 crisis (which in the case of Peru has beenrelatively mild). They have grown to become significant players in criticalsegments of the Peruvian economy, offering an increased variety offinancial products, becoming a reference in the microfinance industryboth nationally and internationally and spanning across the country,especially in remote areas.CMAC are savings banks, modelled on the German savings bank system,created in the early 80s to correct the market failure of restricted accessto banking services for large segments of the population, mainly inthe provinces.The General Law of the Financial System defines CMAC as entitiesthat offer deposits to the public and whose specialty consists on lendingto micro and small enterprises. Although their market share in Peru’sbanking system (measured as the percentage of total loans) is small,just 6 percent, CMAC have remarkably contributed to the excellent healthof the microfinance business environment in the country, as a result ofwhich Peru has been awarded the top position in the 2009 MicroscopeIndex. This index, launched by the Inter-American Development Bank,Corporación Andina de Fomento, International Finance Corporation andthe Economist Intelligence Unit, covers 55 countries.CMAC have gradually expanded the scope of its financial services fromcredit pledged with gold or silver jewels as guarantees to consumercredits and microfinance. In the last decade their services have expandedto include a range of new activities, from agricultural credit (since 1999)to housing finance (since 2002). A recent modification to the GeneralLaw of the Financial Insurances and Administrator of Pensions FundsSystem in 2008 authorizes new operations to the CMAC, such as leasing,factoring and discount of bills of exchange.144
On the liability side, CMAC offer mainly savings accounts and fixeddeposits. The total credit granted by the CMAC system increased 39percent in 2008, amounting to USD 1,795 million. At the end of 2009,all CMAC together had almost 400 branches. The majority of the loanswere granted in the provinces (93.1 percent) and the rest in Lima, thoughonly 79.8 percent of the deposits came from the provinces (which reflectthe fact that branches in Lima are mainly used to collect deposits).Around half of the loans were granted to small and medium-sizeenterprises. CMAC have received almost USD 1.5 billions in deposits(as of December 2008), 2.5 times more than Mibanco, a leading bank formicroenterprises (MES).Corporate GovernanceThe mandate of CMAC is clearly related in the law to the support ofthose segments of the population that are not bankarized, mentioningspecifically the micro and small companies. Commercial banks often facedifficulties in assessing the risks of projects from this sort of enterprisesand are thus reluctant to provide credit to them.The cajas have increased their organizational complexity to centralizesome business functions. The twelve CMAC that exist today in Peru aregrouped in the Peruvian Federation of Municipal Savings and Loans Cajas(FEPCMAC). This umbrella organization was created in 1986 with themission of representing the CMAC and to identify, develop and manageservices of common interest. A private, financially and administrativelyindependent organization, it performs evaluation, advisory and trainingtasks. FEPCMAC provides information on the performance of CMAC tothe Banking and Insurance Superintendency (SBS) that conducts bankingsupervision and wields the necessary power of sanction. This division oflabour has contributed to the effective supervision of CMAC, given theclose proximity of FEPCAMC to individual cajas. The FEPCMAC alsopromotes economies of scale through joint projects for developing newproducts and financial services.The governing body of the FEPCMAC is the General Assembly, whichconsists on three representatives from each of the twelve CMAC: theMayor, the President of the board of directors and a manager of each ofthe member CMAC. The General Assembly gathers once a year andelects through secret ballot the president and six directors of the Board.145
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BoxesBox 1. German Sparkassen 27Box
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EXECUTIVE SUMMARYBackground and obj
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nnAccess to Finance in enshrined in
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Chart A.Corporate Governance, Acces
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nThe study also shows that Corporat
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1. INTRODUCTION1.1. Focus and objec
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WSBI members are by definition acco
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For the particular case of developi
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2. THE LINK BETWEENCORPORATE GOVERN
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Table 2. Main features of the Missi
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Access to financeSparkassen promote
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All these examples illustrate how p
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In the case of Peru, the profits th
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Among the WSBI institutions that re
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BOX 2. KENYA POST OFFICE SAVINGS BA
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The fact that the banking system is
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3. CORPORATE GOVERNANCE -CONCEPTUAL
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Figure 2. Sound Governance of Finan
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As can be seen in the figure above,
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nnnAt the same time, the distance a
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The first two elements (the ownersh
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nHowever, this does not mean denyin
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Cooperatives are similar to mutuals
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3.4. FoundationsFoundations do not
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3.5. Good Corporate Governance prac
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F. DISCLOSURE AND TRANSPARENCYPrinc
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4. ACCESS TO FINANCE -CONCEPTUAL FR
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4.1. Financial deepening and improv
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The board does not have any executi
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In other words, sustainable financi
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The following table shows how the W
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The fourth dimension refers to the
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Table 8. Access to Finance in the f
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Only 27 members established in 21 c
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nnDCI (Depth of credit information
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5.2. Corporate Governance and Acces
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5.2.1. Corporate Governance and Ave
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Chart 8.Specific Corporate Governan
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5.2.2. Corporate Governance and Ave
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Chart 13. Corporate Governance comp
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Chart 16. Corporate Governance Inde
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Chart 19. Specific Corporate Govern
Page 95 and 96: ANNEX 1: REVIEW OFTHE LITERATUREThe
Page 97 and 98: Even among the relatively narrow un
Page 99 and 100: Figure A.1. Structure of agents' re
Page 101 and 102: The table captures the essence of s
Page 103 and 104: A case study built by Clarke et al
Page 105 and 106: A very recent contribution to the d
Page 107 and 108: For example, in Latin America, WSBI
Page 109 and 110: The paper examines whether a poor e
Page 111 and 112: For the survival of microfinance in
Page 113 and 114: ANNEX 2: CASE STUDIES 32CASE STUDY
Page 115 and 116: It is one of the major characterist
Page 117 and 118: Although Sparkassen are legally and
Page 119 and 120: Figure A.2. Corporate Loans Market
Page 121 and 122: Financial education is also an impo
Page 123 and 124: Corporate GovernanceKPOSB is wholly
Page 125 and 126: Among the initiatives that the gove
Page 127 and 128: Related to the concession of credit
Page 129 and 130: OPERATIONS1. Deposit Base: It was p
Page 131 and 132: Corporate GovernanceThe Central Ban
Page 133 and 134: To address the problem of capital,
Page 135 and 136: Financial inclusion ranges very hig
Page 137 and 138: CASE STUDY 4:SPANISH SAVINGS BANKS
Page 139 and 140: The uniform financial regulation of
Page 141 and 142: Figure A.3. Governing Bodies - Span
Page 143: The web-based tool www.rededucacion
Page 147 and 148: A specificity of CMAC is that the m
Page 149 and 150: Table A.3.MissionMissionCMAC AREQUI
Page 151 and 152: As of September of 2009, the twelve
Page 153 and 154: Furthermore, the consensus culture
Page 155 and 156: ANNEX 3: QUESTIONNAIREQUESTIONI. Ge
Page 157 and 158: ANNEX 4:THE HONOHAN INDEX 43COMPOSI
Page 159 and 160: COMPOSITE MEASURE OF ACCESS TO FINA
Page 161 and 162: ANNEX 5:QUANTITATIVE RESULTSCountry
Page 163 and 164: Overall Corporate Governance IndexO
Page 165 and 166: REFERENCES- Andrianova, S., Demetri
Page 167 and 168: - FSD Kenya (2009), Financial Secto
Page 169 and 170: - World Bank (2006) The Role of Pos
Page 172: WSBI - ESBG - The Global Voice of S
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Corporate Governance and Access to Finance - ESBG

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