The following is a guest post from Kathy Drake, an Opportunity International supporter who is currently on an Insight Trip in Colombia.
On Monday morning, the official program portion of our Insight Trip in Colombia began. The highlight of the first morning was visiting the downtown office of the Opportunity Bank. Just over two years ago, Opportunity International was granted a banking license in Colombia and made the transition from a non-regulated finance institution to a full-fledged bank. As we listed to the introduction, we came to understand the significance of this change. The previous non-bank organization had been able to offer loans, but not savings products. In order to offer the savings accounts that so many of Opportunity’s clients need and want, it was required by law that Opportunity met the increased operational and capital requirements and registered as a bank.
We met the senior team, and we heard at length from the CEO, Enrique Cardonez. Again, we came to more deeply understand the work here in Colombia. For example, we heard how providing small-size loans and savings accounts to those on the lowest economic rungs of the population is relatively costly. It is a labor-intensive process to service the loans, including frequent repayments and quick loan cycles. On top of that, since the real goal is to transform lives, Opportunity provides business council, literacy education and other training and assistance. This increases costs even further, so much so that it is really not possible to charge the very small clients enough to cover the actual cost of servicing them.
The solution? Include a portion of medium size loans to clients with somewhat larger, more established businesses – loans in the range of $5,000-$10,000 USD – in the bank’s total “loan portfolio”. These loans still help families living in poverty, but the income stream they generate is enough to cover their costs and yield a modest profit. This profit is used to cover the losses from the ultra-small clients, and allows the bank to operate at a break-even point overall.
As we sat listening to Enrique share about Opportunity Colombia, I was struck by a number of other interesting points:
- Going forward, the bank wants to emphasize growth in numbers of clients served, with a special focus on the people living in the most extreme poverty. To do this, they intend on utilizing the Trust Group method.
- The existing capital (assets) and breakeven profitability of the bank will only allow for modest growth, so to accomplish their goal of fast but prudent growth, the bank will likely need additional capital in the form of debt or equity.
- The bank must continue to have stringent risk controls, so as to safeguard the capital entrusted to it, and to remain financially healthy in order to serve more clients in the future.
- The bank wants to establish “Village Savings Groups” – serving as an entry point for the poorest of the poor who might not even qualify for a loan with Opportunity initially. These groups will never earn a profit for the bank, but can be hugely transformational for ultra-poor communities.
As Enrique concluded our session, he spoke from the heart as he described his vision of how “Opportunity International can become a major agent of peace in our country.” He said passionately, “We must bring peace to Colombia. War is caused by those with no economic opportunity, and we can change that. A stable society must be based on economic opportunity for all.”
Kathy lives in Oakland, CA. Kathy recently completed a lengthy career as a portfolio manager with Dodge & Cox, an investment management firm in San Francisco, as well as having launched two young-adult children off to college and medical school respectively – both major accomplishments! She is “transitioning to new work”, and spends considerable time volunteering in faith-based organizations. In addition to serving as Co-Chair of the Ambassador’s Council for Opportunity International, other commitments currently include:
Board Member, Fuller Foundation
Treasurer, First Church Foundation (First Presbyterian Church, Berkeley);
Microfinance Chair for JPOW (the Justice Poverty Oppression and Women Initiative) also at First Pres.;
Fundraising Committee member, International Justice Mission
In her “down time”, Kathy cooks gourmet meals for friends and family, hangs out in the lovely Sonoma Valley wine country, and is learning to grow vegetables and keep bees. She loves visitors! Kathy received her undergraduate and graduate degrees from Pomona College and the Anderson School of Business (UCLA).