Manuel Méndez del Río: “Productive Finance is the most efficient model to ensure the clients’ sustainable success”.
4 billion people in the world are poor. For every adult who is poor, two children are; and for every three men, four women.
Same as in the rest of Latin America, extreme poverty seems stagnant in Dominican Republic and presents a high urban component. The country is the fourth by percentage of women living in poverty (51,8%).
65% of adults in Latin America (250 million) have no access to formal financial systems. In Dominican Republic, by 2088, 71% of adults were not using the financial systems.
In order to meet this unanswered demand, the microfinance sector must overcome the specific obstacles that limit its growth, and must gain scalability.
The BBVA Microfinance Foundation currently attends to one million clients through its eight microfinance-entities in Latin America.
La Romana, Dominican Republic, 12 july 2012.- The Chairman of the BBVA Microfinance Foundation, Manuel Méndez del Río Piovich, gave a master lecture to inaugurate the XIII International Seminar on “Social Management and its indicators: Success of Institutions with a Mission”, organized by the American Development-Foundations Council (Solidarios) in La Romana on July 12th, 13th, and attended by the Dominican Foreign Affairs Minister.
During his keynote speech, titled “Institutions with Mission: Fundamental Strategic Guidelines. Challenges and Obstacles”, Manuel Méndez del Río explained why Productive Finance is the most efficient and sustainable intermediation-channel in the struggle against poverty ”as shown by the fact that – when elements allowing people to escape poverty are analyzed – individual iniciative accounts for 77% of all cases in which the previous was possible, being financial exclusion, on the other hand, the main deterrent.”
“Productive Finances, the model developed by the BBVA Microfinance Foundation, are those which allow the client to undertake a productive activity that renders income covering all actual costs incurred – including the financial ones – and, on top, yields profit. This accumulation of surpluses is what contributes to the GDP growth and permits people overcome poverty”, Méndez del Río pointed out.
“It’s an specialized procedure whose final objective is the clients’ sustainable success, which is sought, not only through the supply of financial services in the widest sense (supporting the enterprises along their complete life cycle), but also through a comprehensive accompaniment, thought to develop the clients’ financial and business culture by means of training and advising”, explained the Chairman of the BBVA Microfinance Foundation.
Concerning the state of the microfinance sector, the Foundation’s Chairman added that, after more than thirty years of existence, the impact of microfinance can hardly be considered relevant, when 65% of adults in Latin America (71% in Dominican Republic) are not using financial services. “The sector clearly reaches a diminutive part of the total poor population, both at regional and global scales. In Latin America there are 647 microfinance entities, attending to about 14 million clients; and merely 21% of whom live in extreme poverty, which shows how far we are from meeting the true demand”, assured Méndez del Río.
These actual facts considered, according to Méndez del Río, the microfinance sector is undergoing crucial challenges and “is ready to take that qualitative and quantitative step that should set it in a position to fulfill its quest and purpose at a large scale and in an effective manner. That is, to grant access to the financial services to a truly significant part of the most disadvantaged population.
“In order to achieve the above, the sector must undertake a deep transformation, both in terms of institutional environments and in terms of the number of agents, their diversity, their dimensions and their individual ability to perform”, continued the Chairman.
Consequently, Méndez del Río added that “one of the prerequisites for the sector to succeed in that transformation lays on its capacity to overcome the obstacles derived from the nature and functioning of the microfinance entities themselves. Obstacles that, direct or indirectly, always relate to efficiency issues; that is, to the ability to offer good products and services at ever decreasing transformation costs, and, thanks to it, at a lower price. All that with positive earnings’ margins and levels, allowing a sustainable and constant growth and, therefore, without undermining financial solidity.”
The Chairman of the Foundation also remarked that, among the challenges microfinance entities face before they are able to improve financial inclusion significantly, the essential ones refer to the need to increase access to capital (debt and equity), to formalize institutions and to ensure their sustainability, transparency, efficiency and accountability.
Finally, the BBVA Microfinance Foundation Chairman reminded all participants that“ solving these problems will only be possible, if the sector is capable to avoid the risk of drifting away from its essential mission”.
BBVAMF: US$ 3.2 billion in granted credits
The BBVA Microfinance Foundation is a non-profit entity, created by BBVA for philanthropic purposes in 2007 and devoted to promote the economic and social development of the poorest people in society through Productive Finance. The Foundation is independent in terms of governance and management and is not part of the BBVA financial group.
Nowadays, the Foundation attends to a current base of 1 million clients and has granted US$ 3.2 billion on aggregate, through its eight microfinance entities in Latin America: Banco de las Microfinanzas-Bancamía (Colombia), Caja Nuestra Gente y Financiera Confianza (Peru), Fondo Esperanza y Emprende Microfinanzas (Chile), Contigo Microfinanzas (Argentina), Microfinanzas PR (Puerto Rico), and Microserfin en Panama.