Micamericas

Oct 15, 2008

Twice a Winner: FMM Popayán

Award for Excellence in Microfinance (Non-Regulated Institution)

By Lucy Conger

Tucked into a lush mountain valley in western Colombia, Popayán is a picturesque provincial town whose economy has weakened in recent years. Yet in this quiet setting, the Women´s World Foundation Popayán (Fundación Mundo Mujer or FMM Popayán) has developed a thriving microfinance institution (MFI) that has managed to sustain double-digit growth of its client base and loan portfolio over time.

FMM Popayán won the 2008 Inter-American Development Bank Award for Excellence in Microfinance (Non-Regulated Institutions) for the second time in eight years.  Moreover, FMM Popayán is the only MFI to have won the IDB prize twice.

By both economic and social yardsticks, FMM Popayán’s performance is outstanding. Serving over 223,000 borrowers with a portfolio of $142 million, the institution has the lowest average outstanding balance ($646) of any major Colombian MFI. FMM Popayán is exceptionally well capitalized with more than $45 million in equity and a moderate leverage rate.  Borrowers have maintained a delinquency rate of only 1.4 percent and  operating costs were just 10.5 percent of its gross loan portfolio. This demonstrates “a superior performance by international standards for loans of less than $1,000,” says Fermín Vivanco, investment officer for IDB’s Multilateral Investment Fund (MIF).

FMM was born in 1985 as a branch of Women’s World Banking in Cali, Colombia’s third largest city. Four years later it became an independent microfinance institution. In 1991, FMM expanded its portfolio with a small projects loan from the IDB, and in 1993 it received financing as one of the first ventures of the Multilateral Investment Fund. Over the past 15 years, FMM has grown steadily and established branches in other cities.

Quality client service is emphasized at all levels of FMM’s operations, says Leonor Melo de Velasco, President of FMM Popayán. In association with Efecty, a company that specializes in cash management, FMM Popayán has established 30 corresponding branches that provide microentrepreneurs with services for making loan payments and money transfers.

“The quality management system has set a priority of knowing clients’ needs, and we work to meet those needs with quick response, adequate loan amounts and good customer care,” says Melo de Velasco. In addition to services provided by Efecty, FMM Popayán serves clients with mobile offices, a toll free customer complaints line, and customer service agents who have high standards for tailoring loans to each client and disbursing loans quickly.

In the past five years, FMM Popayán has shown rapid growth and expanded its operations from its provincial base to regions throughout  Colombia, including the capital, Bogota. Its loan portfolio has grown at an average rate of 50 percent annually and the number of clients has increased by 40 percent each year.

This extraordinary growth has been fueled by competition from other players that have entered the Popayán microfinance market since 2003.  “We’ve grown more than we planned due to competition, which helped us because we were forced to improve, to show what makes us distinct, and to have projects that develop client loyalty,” says Melo de Velasco.

FMM Popayán is also implementing actions and procedures to ensure that staff follow best practices for financial responsibility. Before granting a loan, the FMM team checks credit bureau files and reviews the client’s payment history and current level of debt. All borrowers are informed of the terms of their loans, including loan amount, interest rate, guarantees and repayment period, along with an amortization schedule that assures clients that the amount of their loan payments are fixed and will not vary.

Award’s Finalists

- ALSOL (Mexico)

- CMM Medellín (Colombia)

- Crecer (Bolivia)

- PRODESA (Nicaragua)

- Fundación WWB Cali (Colombia)

The Inter-American Development Bank is not responsible for the editorial content; the views expressed in the article are those of the author.

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