Microfinance and Capital Markets - Council of Microfinance Equity ...

• Cash mobilization and handling—At present, Compartamos’ regional offices donot handle cash. Instead, clients use other commercial banks throughout Mexicobased on agreements Compartamos has negotiated with these banks.Compartamos has the dual task of cash management—of converting the presentoffices/ branches to real banking branches able to handle cash securely—and theneed to develop systems to move that cash to regional and/or central depositoryfacilities. This has to happen if Compartamos intends to mobilize deposits inthe future.• Savings mobilization—How should Compartamos approach the costly and veryintensive effort of mobilizing savings from its clients? Compartamos needs todesign savings products are both economically viable for the bank as well asappealing to its clients. Savings are an important potential service forCompartamos’ poor clients, but they can be a costly alternative way to fund thebank if not handled properly. Also, the branch offices will need to be able tophysically handle the increased inflows of clients once savings products areavailable. This will require significant investments in the present offices toconvert them to full branches or the build-out of new branches in some cases thatcan mobilize savings with adequate security and also handle the traffic flow.• Diversification of product offering—Compartamos will need to diversify itsproduct base to become a full service bank for its clients. Currently, village-grouploans dominate the product offerings; individual loans, housing rehabilitationloans, money transfers and remittances and insurance products could add feeincome and provide Compartamos’ clients with a wider range of services. 38• Competition—Finally, given its very high profitability, high real rates of interestto its clients and overall strong financial performance, it seems reasonable thatCompartamos will face strong competition in the future from other banks or nontraditionalfinancial institutions in Mexico, such as Banco Azteca and the recentlylicensed Banco Wal-Mart. Compartamos will need to decide how to step downthe pricing curve (i.e., reduce its interest and fees, while still remaining profitableand competitive for the long term and continuing to serve the needs of itstraditional client base).IV. EQUITY BANK LIMITEDEquity Bank was founded in Nairobi in 1984 as the registered building society EquityBuilding Society (EBS). It focused initially on providing term loans and mobilizingdeposits. The bank opened several branches in the nearby Central Province during itsinitial years of operation. Less than a decade after its inception, the high risk of termloans, stagnant deposit base, lack of capital, poor management and a difficult38 Banco Compartamos, Offering Circular, 85-86 (See “Our Strategy”).16