The Microfinance Institutions (MFIs) were born with the aim of providing basic financial services, mainly microcredit sectors not normally served by traditional banking, as were microentrepreneurs in the informal economy and, in general, the population excluded from access to the capital that "could start small businesses that would generate income with which they could improve their standard of living and that of their families" (Cumbre del Microcédito, 1997).
The first to venture into the field in Peru were Non-Governmental Organizations (NGOs) that, from the 90's, gradually became Development Entities for Small and Micro-enterprises (Edpymes), then Financial Companies and, in a specific case, in Banking.
In short, the original mission of the MFIs was to contribute to the reduction of poverty, through the inclusion to the financial system of those people with low income from the marginal rural and urban areas, whose source of funding was constituted by informal lenders (agiotistas).
For a better evaluation of their mission, MFIs measured their performance through two parameters: scope and sustainability.
The scope was related to the social performance of the MFIs, that is, to their commitment to poverty reduction, measured through the impact on the income, employment and well-being of their clients.
For its part, sustainability had to do with financial matters, that is, with generating the necessary operational efficiency and profitability (ROE and ROA) for its continuity in the market.
All this under the premise that the sustainability of the MFIs was a means, but not an end in itself; that allowed long-term stability but without undermining the ultimate goal of the MFIs, which was to serve the poorest.
Unfortunately, such a laudable mission, for better or for worse, to date has been disrupted. Currently, many MFIs measure outreach solely through the number of people served by the entity. There are no studies on the reduction of poverty in clients, as measurement of these variables is expensive and difficult. The most that is done is to increase the geographic coverage, taking advantage of the Supreme Decree 134-2006-EF of Peru that created the “Special Financial Support Program for Micro and Small Enterprises- PROMYPE ”, which allows, through a public / private alliance, that microcredit entities, among other points, use the infrastructure of Banco de La Nación, in places where it is the only bank offer or where the bank offer is insufficient; Taking advantage of the scarce competition, to charge rates above the average charged to microentrepreneurs in urban areas, despite occupying the facilities and receiving the support of the state bank.
The priority is now sustainability.
For example, at the end of the previous year, the microfinance bank reached an ROE of 35.07%, well above the average of Commercial Banks (24.53%) and only below BBVA Banco Continental (36.54%) and Interbank (36.75%). %).
Microcredit is currently seen as a profitable segment, on which extraordinary profits can be obtained, under the paradigm that it is "high risk", which "allows" MFIs to charge active interest rates above the market average., despite the fact that the non-performing portfolio ratios of microenterprises are between 4% and 5% (depending on the type of MFI).
One of the main reasons for this to happen is the still incipient competition in the segment, despite the increase in the number of players registered in recent years. Therefore, the apparent market power that MFIs would have would be reflected in the rigidity of the interest rates they charge to microentrepreneurs, ultimately translated into extraordinary ROE's.
Another point, just as decisive, is the asymmetry of information on the demand side and the scarce financial culture of microentrepreneurs, who are often unaware of the interest rates they pay, worse still, the difference between the interest rate annual effective cost rate (TEA) and annual effective cost rate (TCEA).
To correct this, it is not enough for the supervisory body to implement icons on its website where the interest rates charged by different MFIs can be compared; ignoring that microentrepreneurs will hardly enter for review. It is not enough to just focus on providing as much information as possible, forgetting that it may not even be reviewed by microentrepreneurs; and if so, it probably cannot be interpreted, due to their poor financial education. It is necessary to educate, using the spaces offered by associations, unions, Chambers of Commerce, Professional Associations, etc.
Finally, it is necessary to sensitize the MFIs, appealing to the fulfillment of their original mission: to serve the population excluded from access to capital, but without neglecting the scope. Sustainability is favorable for permanence in the market, but it should not be the only guide. Microentrepreneurs will thank you.
