Banking to Serve Microenterprises: The Banestado Case

This paper evaluates the microfinance program undertaken by Chile's Banco del Estado (BECH) through its subsidiary Banestado Microempresa (BEME). BEME was created in 1996, when the state owned BECH took a decision to extend loans to Chile's micro enterprises.

As per the authors, some of the distinguishing features of BEME's performance are:

• High volume business model or "massification";
• Use of state-of-the-art technologies;
• Standardization and automation of processes resulting in reduction of transaction costs;
• Client and product diversification;
• Excellent management information and control system.

The paper concludes with an analysis of factors that have contributed to BEME's good institutional performance, which is characterized by a high quality portfolio and sustainable operations:

• Conducive economic and financial environment;
• Advantages derived from relationship with BECH;
• Client centric marketing strategy.