Library

Paper - English presentation - English

Theme 2: Contrasting methodologies used to expand the outreach of financial services to the rural poor: lessons from Mexico’s PATMIR experience

PATMIR (Project of Technical Assistance for Rural Microfinance) began in Mexico as an initiative aimed at expanding outreach of financial services to the rural poor in a sustainable manner. Using international technical assistance, three primary methodologies were employed:

creating new cooperatives,
strengthening existing cooperatives, and
encouraging existing institutions to expand into underserved areas.

Data from 34 Mexican cooperatives and their clients are used to analyze the outreach and sustainability of these three methodologies.

In general, new and expanding cooperatives attained a better depth of outreach than the strengthened institutions. The Poverty Outreach Index (PO) is a measure combining both the breadth and depth of outreach. The use of this measure reveals the potential for larger institutions with a diverse clientele to be a model for PATMIR. While it is true that some of the smaller subsidized institutions have nearly all of their clients meeting the protypical PATMIR outreach standards, it is important to recognize that larger institutions can and do serve the same segment of marginalized clients in addition to their middle and upper income clients. This strategy has advantages in that it allows for portfolio diversification, liquidity management, economies of scale, and financial viability.

There does appear to be a trade-off between many measures of outreach and sustainability. A higher dependence on subsidies leads to a better depth of outreach, smaller loan and deposit sizes, and lower staff productivity. Not surprisingly, institutions trying to serve a large, rural area per branch have impressive depth of outreach and lower average loan sizes. However, these institutions have a greater reliance on subsidies, lower staff productivity, and higher transaction costs for clients in the form of travel time.

There was no clear winner among methodologies as certain cooperatives from each category achieved both outreach and sustainability. In general, trade-offs exist for each methodology. New institutions have strong outreach indicators and are making strides to becoming sustainable. However, there is a large start-up cost in time, training, and resources. Strengthened institutions start with potentially significant scale, but face ingrained corporate culture that can impede necessary changes. Measurement of incremental outreach and sustainability improvements is difficult in strengthened institutions. Measuring the changes attributable to PATMIR was easier in expanded institutions since new branches were opened in marginalized areas. To the extent that the management is committed to attaining a deeper outreach and the new portfolio is cost effective, more existing institutions will be inclined to serve marginalized groups.