35,000 entrepreneurs, 100,000 employees, financial-services a way to do it. túbanco / SBI Coordinated Small Business Development

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35,000 entrepreneurs, 100,000 employees, financial-services a way to do it. túbanco / SBI Coordinated Small Business Development

Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

Found and operate a regulated niche Greenfield Small Business Finance Institution targeting the growing micro and small business segment underserved by Mexican commercial banks and microfinance institutions in Mexico, the “missing middle”. Clients must have the potential to generate new jobs.

About Project

Solution: What is the proposed solution? Please be specific!

Our main idea is to provide a high added value offer to clients: 1) Integral Financial Solutions: creation of customized solutions oriented to both business and family needs through a bundle of products and services adapted to targeted customer needs instead of the inflexible terms and loan amounts offered by Mexican MFI´s and banks. 2) Convenience: Bring the financial institution to the customer’s business facilities with an intensive use of technology. 3) Accessibility: Loan Officers will have the capability to approve loans during site visits using mobile technology and back office processes will be streamlined with the objective to maximize efficiency and lower costs. 4) Price: Due to larger loan size and greater efficiency, pricing will be 10-20% lower than existing rates provided by MFIs and will be determined using a cost and risk assessment model with a decreasing rate for repeat loans depending on the payment history of each customer. 5) Transparency: Transparent fees (no hidden text) and access to account and loan statement information through the internet, mobile phones, ATMs and a network of agents with Point of Sale (POS) technology besides being able to contact a call center or go to a Business Center (branch). 6) Technical Assistance: Customers will receive technical assistance whenever needed or requested in special locations, the internet and mobile phones. Financial and business development education will be provided through the web and in- person seminars both for clients and the community to enhance the possibility of success of their businesses and to help them feel comfortable using the proposed technology- based channels rather than a more traditional brick and mortar approach. 7) Capacity Building trough strong Managment Team and Long Term Technical Assistance to implement a world-class small business finance bank.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

túbanco‘s goal is to serve at least 35,000 active entrepreneurs after 5 years of operation, resulting in the creation of 100,000 new jobs. A specific methodology will be designed and implemented to evaluate a business’ ability to create jobs, and clients will have access to best practices and information through the web and mobile technology. In Mexico micro and small size enterprises (MSEs) represent 98% of all operating productive units (businesses) and generate 72% of employment, but only 6% of the commercial banking sector’s outstanding loans to non banks are channeled to this segment. According to the Mexican Employers’ Association (COPARMEX), more than 70% of MSEs do not have access to credit and the World Bank estimates that credit in Mexico represents only 4.3% of GDP compared to countries such as Brazil where it represents 9.6% of GDP. This lack of access to finance makes the MSE segment in Mexico a “missing middle” that if properly served could become a motor of greater economic growth and consequently improve the quality of life throughout the Mexican society, particularly at the “bottom of the pyramid”. Mexico has a diverse microfinance sector consisting of an array of institutions of varying sizes offering a variety of loan products. Because Mexico does not have a legal definition for a Microfinance Institution (MFI), multiple types of organizations exist in the sector. MFIs in Mexico have an average loan size of less than USD $300 with interest rates that can be higher than 100% per annum. In 2008, as a direct result of the financial crisis, the average outstanding loan portfolio of MFIs decreased 5% due to a reduction of loan balances. Subsequent enhanced portfolio monitoring increased administrative and personnel costs which resulted in an increase in operating costs from 43% in 2007 to 53% in 2008. túbanco looks to meet the demand for MSE finance by targeting the micro and small business segment underserved by commercial banks and MFIs with processes, financial products and interest rates specifically tailored to this segment, reaching 35,000 clients in 5 years of operation.
About You
túbanco, in partnership with ShoreBank International Ltd. (SBI)
About You
First Name


Last Name


Your Organization




About Your Organization
Organization Name

túbanco, in partnership with ShoreBank International Ltd. (SBI)

Organization Phone

túbanco: +; ShoreBank International: +52.1.477.266.0075

Organization Address

túbanco: Diligencias 162, San Pedro Martir, CP 14650 Del Tlalpan México DF ; SBI: 1200 G St., NW, Suite 401, Washington DC 20005

Organization Country


Organization Type

Private Institution

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Your solution
Country your work focuses on


If multiple countries, please list them here. If your solution targets an entire region, please select it below
Region(s) your solution focuses on:

Latin America and the Caribbean.

Range of turnover in your target firms, in USD

Less than $1 Million.

Average turnover in USD of your target firm

USD 500,000

Number of employees in your target firms

Fewer than 5.

Average number of employees of your target firm


Specify the size, average and range of expected loans or investments in each target firm

Average Size: Years 1-2 USD 2,000 / Years 3-4 USD 3,500 / Year 5 USD 5,000
Range: Years 1-2 USD 1,200-15,000 / Years 3-4 USD 1,200-22,000 / Year 5 USD 1,200-50,000

What stage is your solution in?

Idea phase

How does your proposed innovation leverage public intervention in catalyzing private SME finance?

túbanco will begin operating as a regulated financial institution enhancingemploying the following alternatives to leverage public intervention:

1. Access to deposits from the general public leveraging the private equity investment to support small business lending (túbanco looks to fund at least 50% of this loan portfolio with savings).
2. Governance will be enforced by the Comision Nacional Bancaria y de Valores (CNBV), the Mexican financial institution regulatory authority.
3. Access to funds from Mexican second tier development banks such as Nacional Financiera (NAFIN), Sociedad Hipotecaria Federal (SHF) and PRONAFIM that are looking for innovative distribution channels to support SMEs in Mexico.
4. Alliances with development and training programs to improve the business abilities of small business owners such as Centros Mexico Emprende, Universities, etc.

What barriers does your proposed solution address?

Asymmetry of information, Informality, Lack of collateral, Lack of financial capacity, Lack of SME access to skills / knowledge / markets, Unavailability of financial products tailored to SME needs, Lack of institutional capacity of financial intermediaries, High transaction costs for financial intermediaries to serve SMEs, Lack of competition / incentives for financial intermediaries to serve SMEs, Lack of financing to women entrepreneurs.

If you checked any of these barriers, describe how your solution addresses them

Lack of competition/incentives for financial intermediaries: In Mexico banks tend to target formal workers and medium and large businesses (6% of the Mexican commercial banking sector’s outstanding loans to non banks are channeled to growing MSMEs) while MFIs are focusing on very small borrowers (maximum loan amounts of approximately USD 1,500). Therefore most of the Mexican SMEs do not have access to appropriate loans to help them grow their businesses.

Lack of financing to women entrepreneurs: Market research has been done and túbanco will provide products specifically designed for the needs of women entrepreneurs, such as single mothers.

Asymmetry of information: Transparency will be a key component of the túbanco business model. Clients will be well-informed with regards to fees (no hidden text) and will be able to access account and loan statement information through the internet, mobile phones, ATMs and a network of agents with Point of Sale (POS) technology. All clients will be able to access information via a call center or Business Center (branch) and túbanco will develop data bases with relevant information regarding small businesses in market sectors.

Informality: Potential clients must have a positive credit history of at least one fully repaid loan with an MFI, at least three employees in their payroll or the intention to hire them and have a sustainable operation with growth potential. Ideally, they have access to mobile phones and the internet.

Lack of collateral: túbanco will implement best practice loan origination and underwriting procedures that will focus on cash flow analysis, rather than collateral for loan approval. Collateral will be used on a selective basis to increase credit lines to selected clients.

Unavailability of financial products tailored to SME needs: túbanco will develop customized solutions oriented to business and family needs through a bundle of products and services, rather than the inflexible product offerings currently available specialy in MFIs.

Lack of institutional capacity of financial intermediaries: túbanco will focus specifically on serving MSEs, a market unserved by the microfinance and commercial banking sectors. túbanco will differentiate itself from other MFIs by developing a professional team, hiring experienced collaborators and developing young professionals who are career driven and with specific skills.

High transaction costs for financial intermediaries to serve SMEs: Approvals will be systematized and streamlined by performing a MSE credit scoring solution complemented by on site analysis. This will allow for more consistent approvals and shorter response times to loan requests. Loan Officers will have the capability to approve loans during site visits using mobile technology and back office processes will be streamlined to maximize efficiency and lower costs. Larger loan sizes will allow túbanco to offer lower rates to clients.

Lack of financial capacity: túbanco will target clients with a credit record that have outgrown the Mexican MFIs’ credit offerings and are too small for commercial banks. The service will build customers' financial capacity with personalized solutions in order to improve their activities.
Lack of SME access to skills: clients will receive advisory as needed or requested in branches, the web and mobile phones. Financial and business development education will be provided through the web and in person seminars both for clients and the community, through partnerships with NGOs and universities.

Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact

túbanco is a Greenfield that has not yet started operations and therefore its impact cannot be measured. Nevertheless, the need for small business financing in Mexico and the potential impact of the proposed solution is large, based on the high market demand - 70% of micro and small businesses currently lack access to financing. The impact of a bank focusing specifically on this niche will be significant to the Mexican society in terms of economic growth and employment generation.

Vicente Fenoll, a Mexican entrepreneur associated with Endeavor since 2004 that leads the túbanco initiative, successfully founded FinComún in 1994 and functioned as CEO until June 2010. In the 15 years under Vicente’s leadership FinComún emerged from a Greenfield to become a major player in the microfinance sector in Mexico. Currently the MFI has 100 branches, serves 180,000 active clients and has more than 1,000 employees and therefore Vicente Fenoll wants to translate his successful experience with FinComún to the creation of this niche bank initiative.

To support his initiative Vicente Fenoll has put together a team of international SME experts comprised with the following experience:
developing of financial products, channels sales force and marketing strategies for both individuals and small business, financial supervision risk managment,compliance and Human Resources Director in different MFIs.

Vicente Fenoll is also partnering with SBI, a firm with over 20 years of experience in more than 70 countries helping clients and partners assess the financial services needs of un(der)served customers in their markets. SBI works with clients to create solutions to address those needs and develop the capacity of local financial institutions to implement them. In addition to establishing four Greenfield institutions, SBI has an established track record as a transformation and commercialization advisor for more than two dozen leading mission-driven commercial financial institutions, including traditional microfinance institutions, non-bank finance institutions, and commercial banks in the Middle East and North Africa, Africa, Central and Eastern Europe, South Asia, Latin America, and the Pacific.

How many firms do you expect to reach?

A portfolio of 35,000 clients after 5 years of operation

What is the volume of private SME finance you aim to catalyze?

A portfolio of USD 70 million after 5 years of operation, total disbursments are estimated in USD 350 million.

What time frame will be required to reach these targets?

Six years will be needed to reach a target of USD 70m / 35,000 assisted. This calculation assumes the following:

- 3 months to complete the business plan
- 9 months to obtain the financial license from the Mexican authorities
- 9 months to obtain equity and debt investors
- Average loan size of $2,000 US dollars
- Average loan term of 1 year, maximun term 3 years.
- 1 year to fully implement the business model and marketing
- 20% of loan portfolio funded by deposits (US$14 million)

Does your solution seek to have an impact on public policy?


What would prevent your solution from being a success?

1. Access to funding, specifically from development banks.
2. Higher than expected “rotation” of human resources.
3. Violence and economic risks provide the greatest potential challenges in preventing the success of the solution. From an economic standpoint, Mexico’s economy is integrally linked to that of the United Stated (80% of Mexican exports go to the US) so the possibility of a second recession or at a minimum the stalling of the USA’s economy will have a significant effect in slowing Mexico’s growth that will affect small businesses in general.

However, it is because of these challenges and risks that we feel small business banking is so important for Mexico’s economy and development. If we can strengthen the small businesses that are employing up to two thirds of the workforce in Mexico, the social impact to overcome these major threats will be significant.

List all the funding sources that are required for the sustainability of this solution

túbanco estimates an initial funding need of USD $12 million in equity to operate. This equity will be leveraged with Mexican development bank and private banks credit lines for an estimated USD 44 million and deposits from clients in order of USD 14 million to meet the growth projections of the financial institution.

Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?

túbanco will leverage public finance as a component of its funding sources but will, in no way, exclusively depend on public finance to be successful. And intensive strategy on savings from clients and the community will be the most important source of founds on the long term. In the process of keeping savings credit lines from private banks and companies will be an important source of founds. túbanco estimates that at the end of year 5 of operations credits from development banks will represent 35% of total debt.

Demonstrate how your proposed solution will survive a potential loss of its largest private funding source

túbanco will have an strong base of depositor that will help to reduce the dependency of large private and goverment funds. túbanco will develop the ability to offer bonds.

Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation

”Patient” Investors: túbanco will need to find equity investors who look for both financial and social returns on their investments to give the institution time to develop and grow its portfolio to self-sustainable levels. Ideally, these investors will also have small business expertise to support túbanco’s operations as active members of the board of directors.

TA Consultants: Consultants based in-country with experience in small business lending; the ability to train and mentor local staff; and the knowledge of the Mexican small business market will be a key element to contribute to the development of a profitable and sustainable portfolio for túbanco.

Chain suppliers: MSEs are clients of chain suppliers and túbanco looks to establish alliances with them to reach them with tailored financial solutions.

Entrepreneur and Social Entrepreneur networks

Are there non-financial issues that could threaten the sustainability of your proposed solution?

Human resources:get the correct people to match with the responsabilities.
Finance Regulations. Potential new obstacles to stop the business plan.

The current regulation for MFI in Mexico is not finished at all, over regulation could impact in cost and proceses.

Political instability can decrease investor confidence and investment in small businesses.

Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically

túbanco looks to scale up through a high growth sector currently underserved in the Mexican market described as the “missing middle” at the point 2. For the next five years the plan is to reach at least in five cities.

Marketing plan includes a High quality service strategy in order to motivate clients to promote our services through “word of mouth”.

Alliances with chain supplies, and big suppliers of MSE.

Alliances with networks of entrepreneurs, and social entrepreneurs.