Interview with the co-founder of a microfinance project in Colombia

Youth around the world: What is your back background (personal life/experiences, academic and professional life)?

Marcela Torres: During my professional career I have worked in several different industries and for companies of all sizes. Only by experimenting in diverse activities, I believe I now found my true passion. I studied engineering in Bogotá and did a MBA last year at IE Business School in Madrid. A business approach to everything has been a constant in my career, even now that we have a social enterprise. I started my career at Microsoft. After 3 years, I explored the hospitality industry and then moved into strategy consulting where I specialized in financial institutions and government agencies. After some years as a consultant, I worked for the central government of my country in the process of reintegrating ex-combatants into society. Specifically, we designed a fund to use microcredit as a tool for economic reintegration and peace building.

In parallel to the last 3 jobs, 2 friends and I developed a pilot project to learn hands-on about microfinance and development related issues. After the MBA, and with a strengthened team of exceptional people, this year we founded our own Microfinance Institution (MFI) in Bogotá to contribute to social and economic development of our microentrepreneurs using a sustainable and profitable model.

Youth around the world: When and how did you come up with this idea?

Marcela Torres: Back in 2005, while working as consultants, 2 friends (Santiago and Francisco) and I used to get together every Tuesday to discuss ideas on how to make some kind of contribution, given that we have the blessing of having education and opportunities in a country where almost half the population lives in poverty. We thought about giving presents to children in Christmas, building a house for elders and donating our time to a charitable cause.

But all that did not seem sustainable enough. We kept brainstorming until we read “The banker of the poor” by Muhammad Yunus, where we found the inspiration we needed. His ideas, with some modifications, were perfectly applicable to the reality of our country, the industry was very incipient at the time and it seemed to be a sustainable and scalable model.

Youth around the world: Tell us about your project.

Marcela Torres: After some months of intensive research, we decided we needed a real client; somebody in need of financing and whom we could track closely to see the results of our experiment. We chose Dalila, the lady that helped me around the house. And one day talking to her about life, she told me that her dream was to have a hot dog stand. We lent her $120 to buy it and in just two months of operations, she had doubled her income. It is amazing how a relatively small amount of money can cause such a great impact on a whole family. Inspired by her results, we went on with a pilot project that reached close to 100 microentrepreneurs. The project allowed us to get a pretty comprehensive understanding of our client’s needs and behavior and allowed us to develop our own strategy and methodology.

The pilot project was the seed of what today is Prospéritas Microfinanzas, the microfinance institution that Jennifer and I lead in Bogotá. Jennifer is a very inspiring “gringa” that decided to move to Colombia to start this venture with me.

Youth around the world: Tell us about how you project is going. Which results has it achieved?

Marcela Torres: During the MBA, we put together a new team of exceptional people, equally passionate about the mission we pursue. We carefully developed the whole business plan and at the end of the program we won the prize to the “Best entrepreneurial project of the year” at IE Business School.

The project is now a real company. Prospéritas Microfinanzas provides small amount loans to low-income entrepreneurs, solely for productive uses.

We are incorporated as a microfinance institution under the Colombian Law. Dalila, our first client, is working with us as a credit analyst and is doing a brilliant job. She is learning how to use computers, got a scholarship for a course in entrepreneurship and is receiving training from us on financial analysis, client service, and basic business development topics.

Youth around the world: Tell us about the biggest challenges you faced working in this project.

Marcela Torres: We have faced different challenges in each phase of our venture. While developing the business plan, I’d say that the most difficult part was demonstrating to our classmates, professors, mentors and judges that this is NOT a high-risk industry. In fact, our clients pay better than someone like you and me.

Currently, the biggest challenge is to find resources to get past the first year of operations. There are enough funds available for this industry, but it is nearly impossible to access the institutional offering being a start-up.

Youth around the world: Tell us about what kind of help you would like to have to be able to have a bigger impact.

Marcela Torres: Our model has two components:

• A microfinance institution through which we help strengthen income generation activities; and
• A not-for profit that addresses the social development side of our intervention.

We could use help in both.

Microfinance is a capital-intensive business, so the more funds we get in the form of debt or equity, the more microentrepreneurs we can support.

But credit is not enough to cause a true, sustainable impact. So we also need help in building and delivering non-financial services to our clients.

Youth around the world: Tell us about how you see you project in the future (ideal vision).

Marcela Torres: We like to say that Prospéritas is a company of millions of clients… we just decided to start with a few dozens.

A huge outreach is definitely something we want to accomplish. It is also our dream to have a company that serves as a platform of products and services that are relevant to the development of our clients.

Youth around the world: Leave a message to youth around the world that might get interested in running the same kind of project in their countries/communities.

Marcela Torres: Microfinance is successful in places of high poverty rates and a low penetration of the formal banking system.  The market is still way bigger than what we would like it to be, and there is plenty of room for a lot of us to jump in. The more competition we have, the more clients get served and with better conditions.

Innovation is key, but there is no need to start anything from scratch. We have leveraged the experiences of others and you are welcome to build up on ours.

Youth around the world: Leave your personal message to the youth around the world.

Marcela Torres: If you are into technology, education, real estate, finance, agriculture, commerce, health, marketing, manufacturing, CSR, you-name-it… we need you.

No matter what your passion is, I’m sure that with a little creativity, we can link it to a platform of services for development, to contribute the world we want to share.

Got inspired? Take a look at other examples:

What do you do with a wash-machine? Wash clothes?

In Colombia it IS a micro-BUSINESS: Samuel, a wash-machine renter.

What leads to success?

According to the Oxford dictionary, the definition of ‘SUCCESS’ is as follows:

• noun 1 the accomplishment of an aim or purpose. 2 the attainment of fame, wealth, or social status. 3 a person or thing that achieves success.

Another definition found on the internet: (n) The achievement of something desired, planned, or attempted.

So what is success for you?

This post came out after talking to a friend who decided to leave her HR job to follow her passion of working with microfinance. She said: I don’t feel fulfilled with my current job and I have been doing it only because I did not have an opportunity like this.

Sometimes you might have to abdicate from your dreams to achieve other priorities, but try to think for how long more you can stand this position and if the time has not arrived to follow your dreams.

Have you ever watched the video “What leads to success?” from TED ?

SUCCESS: PASSION – WORK – GOOD – FOCUS – PUSH – SERVE – IDEAS – PERSIST

“Do it for LOVE. Not MONEY” – “If you do it for love, the money comes anyway”

Steve Olson wrote:

• Success means knowing I do the right things for the right reasons.
• Success means not compromising integrity.
• Success means I share with those who need my help.
• Success means I give my time to my family.
• Success means providing value to others.
• Success means living up to my commitments.
• Success means building a community – not a network.
• Success means looking in the mirror and liking what you see.

He believes that money is the by-product of living a successful life – not the measure.

Try to list everything you looove doing. Now, can you think of a way to do what you love and get the SUCCESS that YOU want to achieve? If you said yes! Lucky you! Go for it!

Finally, there are only a few more days to 2010 and there is not a better time to think about it. Try to make your own definition of success and share it by adding to the comments! Good luck!

Microfinance. What is it ??

“The microfinance sector is one of the fastest growing multiple bottom-line arenas in the world: an inclusive financial space that brings together social and financial returns within an atmosphere of innovation.” (Microfinance Insights)

“Grameen Bank has reversed the conventional banking wisdom by removing collateral requirement and created a banking system which is based on mutual trust, strict supervision, accountability, participation and creativity. At GB, credit is the entry point and it serves as a catalyst in the overall development process. GB sees credit as an empowering agent, an enabling element in the development of socio-economic conditions of the poor who have been kept outside the banking orbit on the simple ground that they are poor and hence not bankable.

Professor Muhammad Yunus, the founder of Grameen Bank and its Managing Director reasoned that if financial resources can be made available to the poor people at terms and conditions which are appropriate and reasonable, “these millions of small people with their millions of small pursuits can add up to create the biggest development wonder”. This conviction of Professor Yunus had its root in the traditional bank’s structure which has been designed in a way that would never help the poor who constitute the largest segment of the society and the ones who are desperately in need of credit.” (United Nations Educational, Scientific and Cultural Organisation)

“Microfinance offers poor people access to basic financial services such as loans, savings, money transfer services and microinsurance. People living in poverty, like everyone else, need a diverse range of financial services to run their businesses, build assets, smooth consumption, and manage risks.

Poor people usually address their need for financial services through a variety of financial relationships, mostly informal. Credit is available from informal moneylenders, but usually at a very high cost to borrowers. Savings services are available through a variety of informal relationships like savings clubs, rotating savings and credit associations, and other mutual savings societies. But these tend to be erratic and somewhat insecure. Traditionally, banks have not considered poor people to be a viable market.

Different types of financial services providers for poor people have emerged – non-government organizations (NGOs); cooperatives; community-based development institutions like self-help groups and credit unions; commercial and state banks; insurance and credit card companies; telecommunications and wire services; post offices; and other points of sale – offering new possibilities.

These providers have increased their product offerings and improved their methodologies and services over time, as poor people proved their ability to repay loans, and their desire to save. In many institutions, there are multiple loan products providing working capital for small businesses, larger loans for durable goods, loans for children’s education and to cover emergencies. Safe, secure deposit services have been particularly well received by poor clients, but in some countries NGO microfinance institutions are not permitted to collect deposits.

Remittances and money transfers are used by many poor people as a safe way to send money home. Banking through mobile phones (mobile banking) makes financial services even more convenient, and safer, and enables greater outreach to more people living in isolated areas.Financial services for poor people have proven to be a powerful instrument for reducing poverty, enabling them to build assets, increase incomes, and reduce their vulnerability to economic stress.” (CGAP)

You might be asking yourself…

… Aren’t poor people too poor to save?

… Who Are the Clients of Microfinance?

… Does Microfinance Help Poor People?

… When Is Microcredit Not the Answer?

Check out the links on the right side of this blog for more resources.