Although born into a wealthy family in Bolivia, Pilar Ramírez was part of a generation whose social conscience was formed by the events of the late 1960s. As a high school student, Ramírez was galvanized into activism when the revolutionary hero Ché Guevara came to Bolivia and was killed by the military dictatorship in 1967. “Ché had impressed the youth here, as he represented change and hope that a ‘new man’ – one who cared about the needs of the poor – was possible,” she says. At that time, she might have been stunned to learn that her belief in social justice would ultimately lead her to become a banker, and eventually the chair of CONFIE, a bank holding company.
Ramírez is one of the pioneers of microfinance in Bolivia, and indeed, in Latin America. The microfinance institution (MFI) she launched in 1985, FIE, was Bolivia’s first. Ramírez’s journey from revolutionary to bank board chair parallels the journey of the Bolivian microfinance sector from its beginnings to its current mature status. Unlike some youths, whose passion for social change dissipates as they “grow up”, Ramírez has not lost her fervor. And as the journey has proceeded, Ramírez has come to believe that she, FIE, and microfinance in Bolivia have all made significant contributions to the lives of low-income Bolivians.
Before she learned about microfinance, Ramírez trained as a clinical psychologist, but soon, “I started questioning my role as a psychologist in terms of bringing about change.” Some of the miners she worked with were unable to calculate whether their cooperatives were making a profit or not. She watched as bankers kept miners and campesinos away from their branches. She remembers that bank security guards had orders to get anyone who looked like a peasant out of the bank in five seconds or less. “I realized that enabling disenfranchised people to access economic resources was key to reducing poverty and inequity.”
In graduate school at Harvard’s Kennedy School of Government, Ramírez learned about the microcredit and development work of Grameen Bank in Bangladesh and the Self-Employed Women’s Association (SEWA) in India. The examples inspired her. “Microcredit seemed like an answer to my search for an instrument that could produce real change and would empower women with financial independence,” she says.
In the mid-1980s, over 70 percent of Bolivians lived below the poverty line, and the average per capita income was only $835 per year. Two-thirds of all workers were part of the informal sector, and a trend in this direction was becoming more pronounced: Nearly 90 percent of all new jobs were created informally. Ramírez convinced four women friends to join her in launching a microcredit institution, the Center for Promoting Economic Initiatives, known by its Spanish acronym, FIE. Such an institution could not have begun a moment earlier: FIE took advantage of the end of a terrible crisis of hyperinflation that flattened the Bolivian economy in the early 1980s.
'A 99 percent repayment record'
FIE’s focus was clear: provide individual loans to men and women with small businesses. Ramírez had initially been inclined to work only with women, as she had been carrying the torch for women’s rights from the start. She had chafed when her political party, the Movimiento de la Izquierda Revolucionaria (MIR), or Revolutionary Left Movement, refused to fund the front’s women’s empowerment newsletter. “Even within the revolutionary party, women were second-class citizens,” she recalls. But she saw that poor men were just as excluded from access to finance as women, and so FIE reached out to both. FIE differed from most of the MFIs of its era because it had a strong focus on manufacturing, while the vast majority of clients of other institutions were petty traders. FIE served traders, too, but especially sought out manufacturers because of their potential to generate growth and employment.
The first landmark for FIE and for microfinance in Bolivia was to demonstrate that clients can pay back loans. “It defied the then-conventional wisdom, but a 99 percent repayment record speaks for itself,” says Ramírez. The model proved to be a success. By 1990, FIE had nearly 2,000 clients, with loans averaging $350 and a loan portfolio of $600,000.
The next major milestone in Bolivian microfinance occurred in 1992, when Accion converted a nonprofit microlender, Prodem, into the first commercial bank dedicated to microfinance, BancoSol. This conversion opened the way for Bolivian MFIs to become regulated institutions, able to offer savings services to their clients and to obtain growth capital commercially. “There was an opening of minds in this country, of regulators, central bankers and economists,” says Ramírez. She and her co-founders converted FIE NGO into a regulated institution, FIE FFP (using a special regulatory category known as a private financial fund) in 1998. With its new status, FIE was able to reduce its funding costs and grow faster. For the next eight years, Ramírez led FIE FFP as president of the board, overseeing consistent growth and a few more milestones.
One of those milestones was the move into Argentina, a country with a large community of Bolivian migrant workers. FIE Gran Poder was established to serve them. Ramírez notes, “We had support from the authorities, who let us know that we wouldn’t be bothered if we loaned to migrants.” Gran Poder has become Argentina’s largest MFI, in a country where microfinance has really yet to take off. Today it has over 7,000 borrowers and nearly $10 million in loans.
'We have followed our clients’ growth'
Another milestone was achieved gradually and together with other Bolivian MFIs: a major reduction in interest rates. In the early 1990s, when MFIs were first becoming regulated, interest rates ran from 60 to 85 percent annually. Competition and stringent attention to efficiency, among other factors, have enabled those rates to drop over time, to just under 20 percent today. Ramírez sees the drop in rates as an important victory for clients.
In 2006, Ramírez took a break from FIE, becoming president of LocFund, a regional lender making loans to MFIs across Latin America in local currency to protect them and their clients from exchange rate risk. The move “…allowed me to be part of a team that showed how important lending in local currency is for MFIs because their clients work with local currency,” she explains. She has since returned to FIE, as chair of CONFIE Holding, a partnership of FIE with Blue Orchard Equity Fund, SNS Institutional Microfinance Fund, and Vincent Burgi that is the ownership group for both FIE in Bolivia and FIE Gran Poder. FIE today serves more than 124,000 clients, with a loan portfolio of $310 million and savings deposits of $227 million, and CONFIE is poised to create new opportunities in the future – like moving into rural and remote areas.
Today, however, Ramírez sees troubling developments in microfinance – products of the industry’s very success. As MFIs become more profitable, Ramírez worries that the field is attracting professionals who lack the social commitment of the founding leaders. “It’s becoming like any business,” she laments. At the Solvay Business School in Brussels, Ramírez teaches MBA students that truly successful microfinance institutions go beyond a profit focus to motivate their staff to seek ways to improve lives through microfinance.
Of course, poverty and inequality still plague Bolivia, with 60 percent of the population still below the poverty line, but some important things have changed. Ramírez believes that microfinance has reduced the intensity of poverty and served as the catalyst for improving the living conditions of clients. “Loan after loan, we have followed our clients’ growth, helping them expand their businesses, buy houses, educate their children and get access to health services,” she says.
Over time, the indigenous and other clients who were excluded have adopted the customs of more middle-class people, taking their own place in the public arena. They now circulate in hotels and restaurants where they were never welcome before. Microfinance clients now have the assets and the financial power to make themselves heard, a development demonstrated most dramatically when for the first time a person of indigenous descent, Evo Morales, was elected president.
“Microfinance in this country has contributed to social mobility and empowerment of its clients, there is no doubt in my mind,” says Ramírez.
