Latin Finance - November/December 2009 - 53

mid-cap banks Microfinanciers Lead the Way by Staff Reporters L atAm banks are increasingly seeing the benefits of sustainability and strong governance, which are more in demand by stakeholders as the crisis dissipates. However, while some mid-cap financial institutions have been forced in line by equity listings, others have not yet brought systems up to par. The third annual ranking of mid-cap banks for corporate social responsibility, governance and sustainability by Management & Excellence (M&E) in association with LatinFinance, shows continued disparity, both between banks of similar size, and institutions in the same country. In particular, units of some of the banking’s household names do poorly in the survey, while those engaged in microlending are doing well. “There is a long way to go for LatAm mid-cap banks,” says Angelica Blanco, São Paulo-based analyst at M&E. The study notes a general absence of very basic transparency, such as updating bank websites, which are the first port of call for investors and analysts. M&E adds that many institutions do not even publish investor relations contact details, suggesting that they may not be prepared to deal with stakeholders. Nonetheless, M&E notes that mid-cap banks have some specific characteristics that differentiate them from larger institutions. A focus on microfinance, social lending and philanthropy are some of the highlights. This year’s survey highlights improvements in sustainability practices generally for mid-caps, despite the fact that the overall score stayed the same. The main evidence of this is that the top six all do better than the winner did last year. At the top of this year’s ranking – up from second in 2008 – is Peru’s Mibanco, which was founded as a bank Smaller financial institutions are grappling with the benefits of sustainability and governance and there is wide divergence in performance. Those involved in microfinance are pulling ahead. Mid-Cap Bank Sustainability Top 20 Bicbanco and Mibanco wrestle for a lead Bank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Mibanco BicBanco Compartamos Indusval Multistock Daycoval Hipotecario BNB ABC Interbank Panamericano BRB Banese Pine Patagonia Banco de Comercio Banco del Caribe Banestes Invex Controladora Cruzeiro do Sul Mercantil Amazônia Paraná Country Peru Brazil Mexico Brazil Brazil Argentina Brazil Brazil Peru Brazil Brazil Brazil Brazil Argentina Peru Venezuela Brazil Mexico Brazil Brazil Brazil Brazil complying with a list of guidelines, but about a coherent business Score model,” says Blanco. 91.10% She adds that Mibanco was one of LatAm’s first 86.30% banks to professionalize 76.03% microlending, when larger 73.29% institutions were still considering it high risk. 65.75% According to 64.38% M&E, roughly 90% of 62.33% Mibanco’s coverage is micro businesses, which 60.27% it claims are often more 58.22% responsible than their 56.85% larger counterparts. “As a rule, they are one54.11% person entrepreneurs 52.74% who take their business 52.74% commitments more seriously,” says Blanco. 50.00% However, Mibanco’s 47.26% ascension highlights lack 44.52% of standardization within countries. “The disparity 41.10% of Peruvian banks is 39.73% alarming,” says Blanco. 32.88% This is largely due to an absence of disclosure – 32.88% an area M&E highlights 32.19% as having most room to improve. 31.51% “While Mibanco is the champion of this study with 91.10% of compliance, there are four banks with less than 10.00% of compliance: Santander, Source: Management & Excellence dedicated to social lending. “Mibanco is showing a strong business model in which sustainability is not only about November/December 2009 LatinFinance 53

Latin Finance - November/December 2009

Table of Contents for the Digital Edition of Latin Finance - November/December 2009