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The Banco Compartamos' Ipo

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Ethics and Governance of Microfinance Institutions

The Banco Compartamos' IPO (A)1
In April 2007, a Mexican Microfinance company stunned the world by issuing shares which were priced at twelve times book value and which were oversubscribed thirteen times! When Carlos Danel and Carlos Labarthe founded their NGO they could not possibly have dreamed that they would be so successful.

Compartamos AC was an NGO established in 1990 as a not-for-profit institution to provide microcredit to poor people. During the period 1990-2000, this NGO received donor funds of $6.3 million. Donors included the CGAP, a donor organization associated with the World bank2, as well as Accion International who was financed by US Aid. Thus, donor agencies were the principals and Compartamos AC was the agent whose mission was to aid the poor by offering them credit.

In 2000, a for-profit finance named company Financiera was

Figure 1: Organisational relationships
Public funds Development bodies : CGAP, IFC

Compartamos

formed with a paid-in capital of $ 6 million. The goal was to make the management more professional and
Private funds

Accion

68% Compartamos (for-profit)

Compartamos AC (NGO)

32%

aggressive to reach its targeted outreach to

ensure financial sustainability thorough economies of scale. The shareholders of Financiera Compartamos included the NGO, Compartamos AC, as well as Profund, Accion International and IFC, the private lending arm of the the World Bank group. Together, these agencies with

1

The case has been prepared by Professor Arvind Ashta of the Burgundy School of Business (Groupe ESC Dijon-Bourgogne) for classroom discussion and study. 2 The CGAP is housed at the World bank but is an independent body. It is currently presided by an executive of the World Bank and its governing members include also the IFC, another member of the World

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