BusinessWeek has a big (3,000-word) story
on Mexican microlending, by Keith Epstein and Geri Smith. It’s heavy on
the anecdote, and it comes down hard on one lender in particular: Ricardo Salinas’s
Banco Azteca, which specializes in consumer finance. I’m no fan of Salinas,
who’s a very shady businessman indeed. But I find it interesting that BusinessWeek
concentrated on Azteca.
It’s well known that Azteca is extremely profitable and charges very high rates
of interest – that’s why everybody from Wal-Mart to HSBC is trying to
muscle in on Azteca’s territory and enter the same market. But the thing is,
Azteca never really claims to be a microlender in the way that Compartamos,
say, does. Azteca is unashamedly a for-profit institution, and doesn’t even
attempt to justify its activities by pointing to the way in which they help
Meanwhile, Compartamos, which was founded with money from the likes of CGAP,
charges just as high interest rates, but dresses them up in all manner of development
and social-welfare frippery.
This is why I welcome Wal-Mart’s move into the Mexican banking system: it’s
the only way that interest rates are really going to fall. That said, BusinessWeek’s
example of a Wal-Mart television-finance plan with an APR of 86% does give me
pause: it might be that Wal-Mart becomes just another usurer, rather than a
real force for driving lending rates down to sensible levels.
Where I have no faith at all is in the ability of the big foreign-owned Mexican
banks to help solve the usury problem. Citi’s Banamex has its Crédito
Familiar brand; HSBC has a 20% stake in Financiera Independencia. Both are an
entrenched part of the Mexican banking system, where there has historically
been very little competition on retail lending rates: there’s a very small number
of banks, and consumers find it impossible to find one which lends at a much
lower rate than the others.
If there is any hope, then, it lies either with Wal-Mart or else with Mexico’s
dysfunctional legislature, which could presumably cap interest rates were it
so inclined. I’m not holding my breath.