Research & Analysis

The Challenge of Growth for Microfinance:The BancoSol Experience

The rapid growth of BancoSol in Bolivia and its transformation from an NGO (PRODEM) to a licensed commercial bank illustrates important lessons for other microfinance institutions (MFIs). This note focuses on the financial and management challenges MFIs face as they grow and formalize. It is based on a 1996 Ohio State University paper, BancoSol: The Challenge of Growth for Microfinance Organizations.

BancoSol is a for-profit commercial bank established in 1992 to work exclusively in the microfinance sector. As of November 1996, it had a loan portfolio of US$43.1 million, with more than 69,900 loans outstanding and about 50,000 savings deposit accounts. BancoSol is now financially sustainable: interest income pays its full operating and financial expenses. Under the prudential supervision of the Bolivian authorities, it has funded the expansion of its operations by capturing commercial loans and deposits from the public. As long as its current policies continue, BancoSol can look forward to increasing the outreach of its financial services for the foreseeable future without relying on scarce and undependable donor funds.