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Banco ProCredit El Salvador: Introducing Rural Finance into Urban Microfinance

This presentation discusses the performance and impact of Banco ProCredit El Salvador's rural lending program in an urban microfinance institution. It explores the adaptation of features to serve rural customers, compares rural and urban portfolios, and assesses risk management and profitability.

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Banco ProCredit El Salvador: Introducing Rural Finance into Urban Microfinance

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  1. International Conference on Rural Finance Research: Moving Results into Policies and Practice 19-21 March 2007 Introducing Rural Finance into an Urban Microfinance Institution:The Example of Banco ProCredit El Salvador Juan Buchenau Prof. Richard Meyer March, 2007

  2. Contents of the Presentation • Objective of the study • Key research questions • Methodology • Major findings and conclusions: • Customers served • Relative importance • Risk management • Profitability

  3. Objectives of the Study • Assess the performance of ProCredit El Salvador’s rural lending program, which was initiated in 1,992, especially focusing on: • Updated documentation of rural lending technology • Comparison of mature rural and urban portfolios over a longer period of time • Loan officer productivity and performance • Management of major external shocks

  4. Key Research Questions • Which features were adapted to urban microfinance in order to serve rural customers, many of whom live from agriculture • What is a rural lending portfolio’s contribution to a mature microfinance institution? • Is rural lending much riskier than urban lending? • Who is being served? How deep can an individual lending technology reach down to serve low income customers in rural areas?

  5. Methodology • Evaluation of literature about Banco ProCredit and it’s rural lending program • Updating of quantitative information about lending and costs of Banco ProCredit • Interviews with relevant officers of Banco ProCredit to discuss the quantitative results and to get updated information about recent changes in qualitative aspects

  6. Key findings – Customers Served I Source: ProCredit El Salvador Accounts (2006)

  7. Key Findings – Customers Served II Source: Gonzalez-Vega, et al. (2002)

  8. Key findings – Loan Officer Performance Source: ProCredit El Salvador Accounts (2006)

  9. Key Findings – Relative Importance Source: ProCredit El Salvador Accounts

  10. Key Findigs – Risk Management(Write-offs as % of each year’s average portfolio) Source: ProCredit El Salvador Accounts

  11. Key Findings – Profitability(annualized data) Source: ProCredit El Salvador Accounts (2006)

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