Global Partnerships to help MFIs rival Compartamos’ monopoly in Mexican microfinance

Microfinance Monitor, Feb 15, 2010: Global Partnerships (GP), a Seattle-based nonprofit that supports microfinance programs in Latin America, has announced that it has expanded its programs to Mexico apparently to provide a level-playing ground for new MFIs.  In October 2009, GP made a loan of $500,000 to a Mexican microfinance institution named Fundación Realidad (FRAC), a nonprofit organization that serves primarily rural women clients in 11 states and charges interest rate at 58%, which it claims is 12% less than the median in Mexico.

“Although the initial loan to FRAC is relatively small, our expansion to Mexico is an important step because of the need for affordable, mission-focused microcredit in Mexico,” said Global Partnerships’ President and CEO Rick Beckett. “FRAC shares our commitment to reaching poor families with affordable credit and other services that can help them break the cycle of poverty.”

FRAC, for example, a World Vision affiliate, fits two of Global Partnerships’ investment criteria. The organization is bringing microcredit to underserved markets. With 17 branches in 11 states, FRAC works in some of the poorest areas in Mexico, including some that have been hit with natural disasters; and serves a client base that is 82 percent women and 87 percent rural.

The microfinance industry in Mexico, which developed later than in countries such as Bolivia and Nicaragua, has experienced fast growth in recent years. But it is currently dominated by Compartamos, which has helped expand the reach of microfinance in Mexico. The lack of competitors has contributed to very high interest rates in the country, about double the rates in Central and South America.

“As the Mexican microfinance industry matures, GP will look for new opportunities to invest in microfinance partners that share our commitment to social impact,” says Global Partnerships’ Rick Beckett. “Working with FRAC is an exciting first step.”

Founded in 1994, Global Partnerships (GP) is a Seattle-based nonprofit organization that expands opportunity for people living in poverty by investing capital and management expertise in socially motivated microfinance institutions. GP raises capital through a microfinance investment fund strategy. With staff based in Seattle and Managua, GP currently invests in 28 microfinance partner institutions in seven Latin American countries that together, serve 812,000 borrowers.