Microfin

Michael  Chu; Enrique  Kramer

Case | HBS Case Collection | June 2009 (Revised July 2010)

Microfin

by Michael Chu and Enrique Kramer

Abstract

The case presents the management dilemmas of a new institution in an undeveloped microfinance market in Latin America. Supported by a globally recognized industry player, it is the result of the efforts of two fledgling local entrepreneurs with a business model they believe can achieve a substantial and profitable share of a potential $150 million market. With the backdrop of the 2002 banking crisis, the governing leftist coalition is promoting microfinance as a means to reduce poverty, but banking authorities have so far issued no regulation to promote it. Another competitor with similar characteristics to Microfin started doing business a few months earlier, and there are rumors that the largest bank in the country is studying the possibility of a fully owned subsidiary exclusively dedicated to microfinance.

Keywords: Business Model; Developing Countries and Economies; Social Entrepreneurship; Microfinance; Governing Rules, Regulations, and Reforms; Industry Structures; Competitive Strategy; Financial Services Industry; Latin America;

Format: Print

30 pages

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Citation:

Chu, Michael, and Enrique Kramer. "Microfin." Harvard Business School Case 309-126, June 2009. (Revised July 2010.)

After long dominating Mexican microfinance, Compartamos Banco faces the emergence of fintech, just as for the first time its loan portfolio and clients have declined. Enrique Majós, CEO of GENTERA, the bank´s parent company, is keenly aware of the profound changes since the Compartamos IPO in April 2007, when it was valued at $1.5 billion and became the first bank wholly dedicated to microfinance to be quoted in a major stock exchange. Since then, the market has become intensely competitive, with both large established institutions and new entrants vying for the same customers. Simultaneously, the digital era has spawned fintech, threatening to disrupt Compartamos’ highly successful model but also providing opportunities for the bank to reshape it. While challenged to manage key innovation within a leading incumbent, Majós must consider whether to commit his team to a major cost reduction in the next few years to his board of directors at their next meeting at the end of the month.

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Microfin

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