The encyclopedia · Finance & Accounting · Strategic decision · 1992–1996
BancoSol made Bolivia's NGO microlender a deposit-taking bank without losing its mission
Bolivia's PRODEM microlender was rechartered as BancoSol, a private commercial bank, in 1992 — deposit-taking funded growth and the small-loan mission survived.
BancoSol · PRODEM
The solution
In Bolivia, the NGO PRODEM built a successful microlending operation serving poor clients, but its growth was constrained by rigid access to donor funds. The next step required a different legal form, not a different product.
Building on PRODEM's experience, BancoSol was chartered as a private commercial bank in 1992 — the formalization gave it the authorization to mobilize deposits, and it became the microfinance organization with the largest number of clients in Latin America.
The growth brought pressure: as the bank scaled, revenue as a share of productive assets fell and the average cost of funds rose, cutting the operating margin by 13 percentage points. BancoSol met the challenge by reducing operating expenses relative to assets, and portfolio efficiency grew steadily.
The 1996 study concludes that success came from financial discipline, a lending technology suited to the market niche, a long learning period, and the upgrade into a formal intermediary. It finds no mission drift: BancoSol continued to focus on small loans to microentrepreneurs who could never access conventional banks.
Why it worked
- Deposit-taking replaced rigid donor funding with cheaper, scalable money.
- The margin squeeze was met by cutting operating costs, not loan prices or mission.
- The lending technology and learning built under PRODEM carried over intact.
- A regulated charter built the credibility that attracted depositors.
What can be applied
When growth is capped by donor money, change the funding structure, not the mission: a bank charter turns savings into a scalable loan base, and the lending technology survives the upgrade.
Aftermath
A 2010 study by Harvard and University of Rhode Island researchers, summarized by Stanford Social Innovation Review, describes BancoSol as one of the two pioneering commercial microfinance banks of La Paz — and shows the hybrid culture was the hard part. The bank's identity split between social workers and bankers, and it recovered only after replacing most of the development-oriented staff; it later adopted some of rival Los Andes' practice of hiring graduates and training them in both development and banking, resolving the tension between profit and impact.
Sources
- Bancosol: El Reto Del Crecimiento En Organizaciones De Microfinanzas
- Turning a Profit by Helping the Poor
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