Few banks give their clients dispensation to sell oranges in the car park, but then few banks lend money to itinerant fruit sellers. Banco Adopem, or ‘the women’s bank’ as it is more commonly known, is a microfinance lender and becoming one of the Dominican Republic’s best-known institutions. It is not, however, a typical bank.
“It’s good having a fruit seller client in the yard,” says bank president Mercedes Canalda. “If I let him do business here, we can collect his repayments easily and I know he is not going to abscond. He’s one of my best clients.”
Ms Canalda is on first-name terms with a lot of her customers, the majority of whom are women and many of whom are illiterate. “Don’t think that not reading or writing stops you being a good business person,” she warns. Adopem, first established as a non-governmental organisation (NGO) by Ms Canalda’s mother, does not offer charity or handouts.
Although it only undertook the transformation from NGO to bank in 2003, Adopem’s profits have increased year on year and it has a B+ rating from microfinance rating outfit Microrate. It has a loan portfolio of $12.2m and 47,000 microcredit clients with an average loan size of $255. Ms Canalda’s clients are grassroots capitalists and, with ‘bankerisation’ on the industry agenda, mainstream lenders are seeing microfinance in a new light.
Ms Canalda says: “The whole idea [of Adopem] is to stop the marginalisation of the poor – we provide a window for extremely poor people who would otherwise miss an opportunity to save or borrow money.”
Averting crisis
That Ms Canalda managed to launch a bank in the midst of the crisis is testimony to her banking expertise. The former banker at the central bank says that she was first in line to withdraw deposits from the stricken banks when she got wind of their imminent collapse, putting funds into high-interest central bank accounts and pushing to ensure hard currency loans were repaid before the peso went into freefall. Using the NGO’s funds to buy a cut-price development bank was easier than applying for authorisation from the superintendency from scratch, and provided a useful additional infrastructure.
In many ways, Adopem’s method of operating makes it something other than a scaled-down replica of a standard bank. Although the bank is increasingly taking on male borrowers, its priority was always the financial empowerment of women, coupled with the need to reduce business risk. As Nancy Barry, president of the umbrella organisation Women’s World Banking, says: “Very poor women repay loans better than very poor men. Very poor people generally repay loans better than everyone else.”
Female attraction
The underlying demographic explanations for the gender difference are all too evident in the Dominican Republic. Typical working class Dominican women stay in the same place, bringing up families on their own; men tend to travel, either looking for work or spending time between families. Ms Canalda says: “Research has shown that for every 100 pesos earned by a woman, she will put 70 toward her family – food, education for her children or housing. Men by comparison give 30.”
When Adopem was established in the 1990s, it was impossible for women to apply for loans without the consent of their husbands. Another of the bank’s tenets is that it is not in the business of consumer lending. Ms Canalda says: “We do not give money to people to buy televisions or videos. We lend so they can grow their business.”
The fruit seller operating out of the bank’s car park is in some respects a typical customer – other than the fact that he is a man. Having lost a stall in the central market, he applied for a loan to buy a trolley from which to sell his wares and to invest in stock. The trolley cost $40 and he says it has increased the scope of his business. His location is valuable, he adds, because Adopem is next door to Santo Domingo’s main military hospital, which guarantees a steady stream of customers.
Among Adopem’s clients in Santo Domingo, The Banker is introduced to a family that reupholsters mattresses, a cobbler who makes cheap but serviceable sandals that he sells to local shops, and a woman selling candles and greetings cards from a small booth beneath her family’s apartment building. These are long-term clients, many of whom have paid off initial loans and borrowed more money to help build their businesses, investing in tools, stock or larger premises.
Ms Canalda has developed a number of tools to help keep delinquency rates to a minimum. The evaluation process is the most important one, she says. Loan officers travelling the country by motorbike use Palm Pilots to collate initial information about prospective clients, including their social circumstances. This information uploads instantly into the bank’s IT infrastructure and assists in monitoring repayments and credit history as the client-bank relationship progresses. Sometimes the bank will help potential clients to develop business ideas or offer training if it thinks a would-be borrower needs to improve their skills before going into business. Lending officers also collect repayments, which is essential if the bank is to remain profitable, says Ms Canalda.
Syndicated borrowing
Women often form small borrowing syndicates. This reduces risk for a bank because members are honour bound to the syndicate to ensure they pull their weight and the bank lavishes the kind of customer care and attention on their clients that for most banks seldom extends beyond marketing literature. In Adopem’s case, it is essential to monitor how clients’ businesses are performing or whether further loans are advisable because few are collateralised (although a guarantee is often required).
Little alternative
Adopem is not a unique institution. Microfinance is booming globally and is being recognised as an alternative to the kinds of development models that are often dished out by banks or NGOs. Banco Ademi is another well-known Dominican microfinance institution, although it typically lends larger amounts (up to $8000) and extends to larger capital investments for agricultural machinery, for example.
Ms Canalda welcomes the friendly competition but she is aware that as her clients succeed and grow, they become a prospect for larger lenders, including the mainstream banks. However, she hopes that by providing a good, friendly service and diversifying her product range (to include, for example, home loans), she can win clients for life.
As banks scour the world for new clients and revenue streams, outfits such as Adopem and Ademi are arousing some interest – several well-known mainstream outfits are exploring how they can either participate in microfinance directly or invest in the institutions. Ms Canalda recently hosted a week-long training seminar by Citibank; she is keen to ensure that her staff stay up to speed with modern banking principles and practices, she says.
It is almost certain that Citibank will have learned something, too.
