First Venezuelan bank to service requirements of micro-entrepreneurs

An important agreement signed today in CAF will lead to the setting up of Banco de la Gente Emprendedora, CA (BANGENTE), the first institution of this type to be created in Venezuela to finance the requirements of the micro-enterprise sector.

CAF will participate in the formation of the share capital of this financial institution, together with the Inter-American Development Bank (IDB), Gateway International Action Foundation, Profund International, Banco del Caribe, Eugenio Mendoza Foundation, CESAP Social Group, and the Popular Housing Foundation, organizations which signed the agreement.

CAF President & CEO Enrique García said the fundamental objective of the bank was to open access to credit for microentrepreneurs who work informally and so are unable to benefit from traditional bank loans.

He said the Corporation – in support of the sustainable development of its shareholder countries – grants funds to financial institutions which channel them into the microenterprise sector. This is important because of its high impact on incorporation of manpower. "In this respect CAF is financing productive and innovative projects, with a high demonstrative effect which disseminate new and sound approaches to alleviating the social problems of the region, especially unemployment."

Lastly, he said that since 1996 CAF had granted funds to several financial institutions in its shareholder countries with a combined customer base of over 100,000 micro-entrepreneurs, in addition to undertaking operations with several microfinance institutions which decided to become formal commercially viable institutions regulated by the banking superintendencies of their countries.

A relation based on confidence BANGENTE came into being in compliance with the regulations of the Banking Superintendency and a share capital which is equally divided between local (50%) and foreign (50%) partners. The institution will be managed by Venezuelan executives with great experience in banking. The head office will be in Caracas, with branches in the main cities of the country.

One of the challenges faced by the BANGENTE shareholders is to demonstrate that, despite the high interest rate they have to charge for loans, they are convenient, necessary and more economic for micro-entrepreneurs than individual loans with extremely high interest.

The new bank will operate by going directly to the micro-entrepreneur and quickly solving his financial needs on site. This methodology does not place so much emphasis on collateral which depends on accumulation of wealth, but rather on knowledge of the customer and his credit history, based on a relationship of mutual confidence.

BANGENTE starts from the concept that credit is only one component of the services needed to help solve the needs of micro-entrepreneurs. Customers will also be offered savings facilities so that the institution becomes their bank “which lends to them and takes their savings."

Sustained effort The creation of BANGENTE is the outcome of a work of analysis and study of similar successful experiences implemented in countries of the Andean Community, such as Bolivia, Ecuador, Colombia and Peru.

In 1996, the Mendoza Foundation, CESAP Social Group and the Popular Housing Foundation, jointly with Banco del Caribe, invited CAF, IDB, Profund and Gateway Action Fund to form an association to create a specialized microenterprise bank.

These contacts resulted in a seminar in 1996 on financing for this sector, whose presentations were collected in the book “The challenge of microfinance in Latin America: the current view,” which was a first theoretical reference for creation of BANGENTE.

The Venezuelan bank for micro-entrepreneurs, BANGENTE, will soon be a reality which will open its doors to enterprising people who would otherwise not have permanent access to financial services as borrowers responsible for their own prosperity in a context of stability and survival for the informal economy.