Lessons in Microfinance Downscaling: The Case of Banco De La Empresa, S.A.

Few commercial banks have engaged in profitable microfinance lending despite repeated attempts by donor agencies to entice their entry. The case of Banco de la Empresa, a Latin American private bank, illustrates how penetration of the microenterprise market segment could evolve.

Reviews the bank's experience with microfinance, what its motivations were for starting such a program, what adjustments it made in operating procedures and what risks it faced.

Main lessons learned are:

• Starting and sustaining a microfinance program requires committed and visionary leadership;
• Profit must be the principal motivation, not social enhancement;
• Successful operations require a different set of operating procedures, extensive investments in IT, training, staff incentives, a wide network of branch offices and operating hours that are convenient for low income clientele;
• Careful consideration must be given as to how to structure and organize a program within a commercial bank;
• Managers need to focus on operational efficiency and delinquency control and not solely on profits.

[Adapted from author's abstract]