institutional sustainability but with the product (microloans) within a total portfolio. 3 The heterogeneity of the institutions studied and lack of available data made it difficult to compare the specific sustainability of microloan operations. Among the banks studied, microenterprise loans are less than five percent of the total outstanding portfolio. For this reason and because they are often granted as personal loans, evaluating their operational efficiency is cumbersome.4 Thus an approximation of the institutions' operational efficiency is based on data obtained from the ratio of operational expenses to total portfolio (Table 3.5). In the case of BANDES, total personnel and other administrative expenses as a percentage of total outstanding loans is 4 percent. For its microenterprise program, this ratio is 25 percent. In contrast, PROPESA's is 37 percent. This kind of indicator allows comparison of operational efficiency of the microenterprise program both within the institution (i.e., in comparison with other BANDES loan operations) and across institutions (i.e., in comparison with an NGO engaged in similar type of lending). BANDES' microenterprise program was more efficient (as measured here) than the NGO's. Table 3.5 also presents available data for the overall operational efficiency of other institutions. The small proportion of total portfolio that microenterprise programs represent means that they do not pose a significant risk for banks. The overall delinquency rates of microenterprise loans among the banks with large microenterprise loan portfolios—BANDES, Caja Social, and Banco del Pacffico—are less than three per cent. It is important to consider the opportunity cost of dedicating human resources and other operational costs to a portfolio of microenterprise loans. As discussed in the previous chapter, some banks in the study include providing financial services to a lower3 Because the institutions included in the study were so diverse, the comparative analysis is restricted to specific aspects of microenterprise lending and deals only secondarily with the total operations of the FFIs. 4
Specific operational expenses for the microenterprise programs were only available from BANDES. Caja Social and Banco del Pacffico have microenterprise loans in all of their offices and it was not possible to obtain specific microenterprise-related operational expenses.
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Commercial Banks and Microfinance: Practices that Reach Women 69