USAID's Role in Making BancoSol Happen

However, the transition from nongovernmental organizations (NGOs) to for-profit entities proved challenging, particularly in the case of BancoSol, the first bank transformed from an NGO supported by USAID. The transformation process tied up significant resources and management attention, limiting the ability of managers to address operational challenges. BancoSol, which opened its doors on February 2, 1992, was the first commercial bank in the world dedicated exclusively to serving the microenterprise market. The bank's success was a result of adopting a regulated bank structure that allowed it to capture commercial sources of funding and offer voluntary savings services to smaller depositors. This approach provided a model for financial inclusion elsewhere. The transformation of PRODEM, BancoSol's NGO predecessor, into a bank was a complex process. ACCION International played a crucial role in introducing microcredit by partnering with high-quality individuals who might be interested in forming a new organization to pursue microfinance. Pancho Otero, the visionary and energetic Bolivian genius, built the original microlending operation. Martin Connell and Doug Salloum of Canada's Calmeadow Foundation provided essential strategic and operational support for the transfer of operations to a new licensed bank. The BancoSol board of directors, a group of outstanding Bolivians, took the political risk of being associated with a bank that "gouged the poor" with higher interest rates and had the courage to replace their good friend Pancho Otero when the management of the new bank required it. Lucho del Rio, the superintendent of banks, supported the possibilities for Bolivian financial inclusion through a practice of "regulation by winking," temporarily ignoring some banking rules that would have made licensing BancoSol difficult. USAID's role in the transformation of BancoSol was a subject of debate. While Rich Rosenberg, the USAID project manager, claimed that his agency played an honorable but not essential role, Maria Otero, a member of the BancoSol board, argued that USAID's decision to transfer the loan portfolio of an NGO to a for-profit bank was a critical factor in the bank's success. The decision was a bold move, as no one had faced this type of question or decision before, and it required USAID to take a risk that many of its bureaucratic-minded staff abhorred.