The following will be discussed in this chapter: Incredulity, Ignorance, and Indifference; microlending needs its own room; models of downscaling; service company models; financial subsidiaries; lessons from downscaling. | Commercial Banks as Microlenders Summary of the Last Lecture Incredulity, Ignorance, and Indifference Microlending Needs Its Own Room Models of Downscaling Service Company Models They do not own their own portfolios and are therefore not regulated as financial institutions. Instead, they receive fee income from the parent bank for identifying clients, marketing products, appraising applications, and disbursing and recovering loans. Service Company Models The loans stay on the banks’ books. Service companies are easy to set up, since they require little capital of their own and no financial institution license. Where the regulatory framework allows, they are a good way to go. Service Company Models Banco Pichincha, Ecuador’s largest bank with million customers, leads the financial system with nearly a third of all deposits and a quarter of total credit portfolio. Service Company Models In the late 1990s, Banco Pichincha found itself with excess liquidity and a network of 235 . | Commercial Banks as Microlenders Summary of the Last Lecture Incredulity, Ignorance, and Indifference Microlending Needs Its Own Room Models of Downscaling Service Company Models They do not own their own portfolios and are therefore not regulated as financial institutions. Instead, they receive fee income from the parent bank for identifying clients, marketing products, appraising applications, and disbursing and recovering loans. Service Company Models The loans stay on the banks’ books. Service companies are easy to set up, since they require little capital of their own and no financial institution license. Where the regulatory framework allows, they are a good way to go. Service Company Models Banco Pichincha, Ecuador’s largest bank with million customers, leads the financial system with nearly a third of all deposits and a quarter of total credit portfolio. Service Company Models In the late 1990s, Banco Pichincha found itself with excess liquidity and a network of 235 branches, many of them underutilized and unprofitable, due to a deep economic crisis in Ecuador. The bank and Service Company Models ACCION launched Credifé in 1999 as the first microlending service company experiment. Pichincha established Credifé (which means “trust credit”) with a distinct brand to approach the microentrepreneur market without diluting its mainstream brand name. Service Company Models The Credifé window is inside Pichincha branches, but the segmentation of the market is clear, and Credifé creates its own brand presence in ways that work for microenterprise clients. Service Company Models Credifé is now a top competitor in the microfinance market in Ecuador, offering a range of products for the informal sector including working capital, fixed asset, and personal loans. Service Company Models In December 2007, Credifé measured its success by its $184 million portfolio, more than 80,000 active loans averaging around $2,300, and a portfolio at risk rate of 1 percent.
