CMAC Huancayo, Peru

A Credit Union That Listens

CMAC Huancayo, a municipal credit union that serves urban and rural clients in the Peruvian Andes, is proof positive that it pays to listen to your customers. Last year the IDB awarded this regulated institution a prize for excellence in microfinance, in recognition of its ability to introduce innovative financial products and services at reasonable costs and rates.

The credit union is one of the municipal financial institutions born from the expansion of microfinance in Peru over the past two decades. Since it started operations in 1988 in the city of Huancayo, it has opened seven branches and begun to develop a network of decentralized offices to expand coverage in its highland region. Responding to suggestions from some of its 95 thousand clients, it is also introducing automatic tellers so people can bank outside regular hours.

CMAC Huancayo provides a wide variety of products, ranging from personal loans to credit for micro, small and medium-size enterprises, housing and home improvement loans, agricultural credit and pawn services. Its savings products evidence creativity: besides traditional certificates of deposit and savings accounts, it offers special accounts paying higher interest for children and young people, as well as programmed savings accounts that reward the thrifty with preferential interest rates and cash bonuses if they complete one year with the program.

Besides the IDB award, last year CMAC Huancayo was one of the winners in a contest held by FINDER, a program that promotes the development of rural financial services in Peru. The credit union's selected entry was a product that combines rural credit with incentives to save. Producers who obtain loans must salt away a set amount every month for a whole year. Those who manage to save 12 months in a row get a long-term loan at half the average interest rate, plus discounts from participating farm implement and supplies sellers.

At the same time, credit rating agencies have recognized CMAC Huancayo's solid financial performance, based on a cautious growth strategy for its loan portfolio and a conservative policy of provisioning against potential losses due to non-performing loans.

CMAC Huancayo's institutional structure was designed to thwart political manipulations. The municipal government appoints three of the seven members on the board of directors; three others represent civil society and private sector groups, including the Catholic Church and the chambers of commerce and tourism. The remaining director represents the national development bank, COFIDE, which acts as a second-tier lender to the CMACs.

CMAC Huancayo has plans to expand beyond the central highland region. Its manager, Henri Camayo Montalván, said at the Microenterprise Forum held in Cartagena, Colombia that the credit union intends to enter the Lima market, where they hope to eventually double and even triple their number of clients.