BancoSol: pioneering microfinance

Uncategorized
| The European | 10 July 2018

Ever since it was first established BancoSol has made a difference. The importance of creating new opportunities for those without access to the financial system has driven the bank to develop a range of innovative products and services that have come to represent the gold standard of microfinance.

In the mid 1980s, the crisis caused by hyperinflation in Bolivia marked the end for the state economy and the beginning of a free market economy. The process of de-dollarisation destroyed savings and encouraged the emergence of a parallel currency market. By the end of 1985, inflation in Bolivia had reached 8,767% and GDP recorded a decrease of almost 1%.

 

BancoSol’s headquarters in La Paz

The new economic policy affected every section of Bolivian society. The end of the state economy resulted in huge unemployment, which gave rise to a flourishing informal economy, particularly in trade and services. This informal economy was mostly entrepreneurial, but was taking place beyond the regulated financial system, therefore it was hard for new ideas to truly flourish.

In 1986, a new foundation emerged with a mission to create opportunities and generate growth through the provision of loans. Six years later in 1992, the foundation marked a milestone in modern financial history by becoming the very first regulated microfinance bank in the world – and BancoSol was born.

“The birth of BancoSol and the emergence of microfinance in Bolivia came as a necessary response to high levels of unemployment, the proliferation of informal subsistence activities and the inability of Bolivia’s apparatus to generate job opportunities; all factors that characterised the national crisis of the 1980s,” says Kurt Koenigsfest, CEO of BancoSol.

 

CEO of BancoSol, Kurt Koenigsfest

 

At the beginning of the new millennium, this model was put to the test. The economic crisis, triggered by the spread of consumer loans, demanded radical solutions. A far more stable and efficient banking system sprung into life, with the ability to meet the requirements of entrepreneurs.

This new financial model proved to be such a success that many marked it down as “a silent revolution” in the Bolivian financial system; facilitating the emergence of the microfinance industry in Bolivia and providing a platform for financial inclusion.

This innovative approach, which promoted the expansion of solid financial entities, became globally renowned, making BancoSol’s method a global benchmark and an academic case study for those looking to create similar systems elsewhere.

A history of success

BancoSol has grown to become Bolivia’s leading bank, delivering an unrivalled financial performance. At the point of officially becoming a bank in 1992, BancoSol registered a loan portfolio of $4m (85% earmarked for solidarity loans), 17,000 loan clients and four offices in La Paz, El Alto, Cochabamba and Santa Cruz.

The performance exceeded all expectations. In the bank’s first year, it registered a gross loan portfolio of $8.8m; by 2000 this figure had risen to $77.8m and in 2004 $108.6m; five years later the volume of loans climbed to $351.8m and amounted to $1,172.5m in 2015.

As of December 2017, the BancoSol gross loan portfolio had reached $1,456.4m – making it the first microfinance bank to exceed $1,000m in its loan portfolio. The default portfolio is below 1% (the lowest in Bolivia’s financial system) and the bank is present right across the country, through an extensive network of branches and ATMs.

Studied by the best

The way in which BancoSol confronted the nation’s economic challenges has not escaped the attention of experts – in 2017, Harvard University Business School featured the bank’s example in its Masters degree programme.

BancoSol’s financial performance was repeatedly recognised at national and international level. In 2014 the bank claimed first place among the 100 best microfinance institutions in Latin America and the Caribbean, according to the Multilateral Investment Fund (MIF) (a member of the Inter-American Development Bank) and also by the Microfinance Information Exchange, Inc. (MIX). On a number of occasions, BancoSol has also been recognised as the best bank in Bolivia by the CAMEL ranking system. 

BancoSol’s continual development of new channels and services that allow customers to access the financial system is something that sets the banks apart.

The same drive for tailored solutions that led to BancoSol introduce the solidarity loan, has now led to it diversifying its financial proposition. Innovation has led the way: BancoSol is the very first financial institution in Bolivia to introduce mobile agencies that literally transport financial services to areas where they are needed most. Under a sophisticated security system, BancoSol mobile agencies’ facilitate a range of banking services right across the country.

Another transformative service bringing banking to rural areas is the SolAmigo Points system, which allows customers to access cash and check their account in shops, telephone booths, hairdressers etc.

At the end of 2017, BancoSol launched the SolAmigo Express – another exciting service designed to offer assistance right across Bolivian society.

Embracing technology

Similarly, BancoSol has pioneered electronic banking for micro and small entrepreneurs and embraced new technology by introducing a range of innovative products. These allow entrepreneurs to access BanoSol’s services quickly and efficiently, meaning they have more time to focus on growing their business. High levels of security provide peace of mind, so that BanoSol’s services become a tried and tested part of the entrepreneurial network.

Furthermore, in 2016 BancoSol launched AppSol – an application for mobile devices that allows a range of banking services to be accessed from any location, 24/7.

Further information

www.bancosol.com.bo

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