Argentina is not a country in which microfinance flourishes, particularly in comparison with its neighbours, Bolivia and Peru.

Up until the early 1990s, poverty indicators in Argentina were good, and demand for microfinance products was low. It was not until the economic crisis of 2001, which was largely responsible for the growth in the number of people excluded from the banking system, that large-scale MFIs (Microfinance Institutions) began to develop and that commercial banks became interested in this new market.

In Buenos Aires, we visited two MFIs.

The first, FIE Grand Poder is currently the main MFI in Argentina. It not only offers a range of microcredit products, it also offers some non-financial services designed to make life for its 9,000 customers a little easier. These include:

- Reduced health costs: FIE has established agreements with some pharmacies, in the districts in which it operates, that allow FIE customers to purchase medicine at reduced cost. The pharmacy agrees to drop its margins on a range of basic products and also on more specific products such as medication for serious illnesses such as Aids or cancer.

- Microjustice: recently, FIE started working with a Dutch NGO, specialised in law, in order to help its customers sort out their immigration status. In fact, many MFI customers remain illegal as they do not take the necessary steps to acquire Argentinean nationality. Although it is easy to immigrate to Argentina, the process takes time and FIE customers are deterred by the administrative rigidity. The microjustice service, first of all, simplifies the stages that applicants are required to go through to become an Argentinean national, and then helps them to establish legal ownership of their assets.

- Microcredit card: FIE operates in some rough inner-city areas of Buenos Aires and its customers frequently have to confront violent behaviour. It’s not unusual for a customer to be unable meet his credit repayments as a result of an act of aggression, or even to be robbed of his loan money as he’s leaving the FIE branch. The MFI is planning to offer its customers a credit and cash-withdrawal card in order to reduce the risk of theft and therefore the risk of defaulting on a loan repayment. But, not only can this card be used as a means of payment, it can also be used as a means to save by allowing customers to transfer money to a bank account. FIE is also considering the possibility of allowing customers to use this card to carry out international transfers: with immigrants representing 65% of the customers on its books, a service that offers a simplified means of sending money abroad would represent a real competitive advantage.

The second MFI, Cordial Microfinanza, is unique in that it belongs to the banking group Supervielle. Therefore, instead of opening new branches and employing and training new staff, the MFI aims to establish microfinance branches within the existing Banco Supervielle branches throughout the country and thereby reduce its investment costs.

Mr Serviddio, one of the MFI’s managers, took us to visit the “Ferias” of Buenos Aires, the largest night markets in the world, on the outskirts of which reigns the most unspeakable misery. It is here, in these Ferias, that most of the MFI’s customers, both rural and urban, sell their products. In fact, 50% of Cordial’s customers are employed in rural activities, mainly in agriculture, and 50% are employed in urban activities such as in the textile industry or local businesses.

The geographical differences between these two types of customers are significant: “We do not approach customers in the country in the same way as we do in town. In the countryside, they are far more wary, as no one has ever come to offer them help before”.

The loan officers must be far more diplomatic and have to start by winning the trust of their customers, who very often take them for “tax officers”! Loan officers must also explain the benefits of microcredit, because although in urban areas customers are familiar with the banking system, in the country, customers do not necessarily understand the advantages of investing and saving.

On the other hand, one of the positive aspects of rural microfinance is its rapid expansion.  Once established, microfinance develops quickly thanks to word-of-mouth recommendation which is far more effective than in town where “the circuits are very closed, as not everyone knows each other”.