Working for financial inclusion

Financial inclusion is the access and use of a scope of financial products and services by part of the population, within an appropriate regulation that protects their interest and encourages their financial capacities, permanently sustained by components such as clients’ protection and financial education.

At Gentera we work for financial inclusion, therefore, in 2014 we incorporated financial education as an attribute of the financial products we offer, always sustained on our Philosophy and social, economic and human value generation.

Financial education is a fundamental element in the financial inclusion process, for it consists of providing useful information for decision making and financial literacy, both of which foster financial capacities in the population. Furthermore, we always remain focused on clients’ protection and promote an entrepreneur culture, collaborating thoroughly to increase the communities’ participation in the financial system.

Loans (Compartamos)

	Mexico	Peru	Guatemala	Total
Employees	16,448	2,057	494	18,999
Clients	2’573,961	238,361	62,166	2’874,488
% Women clients	89.9%	70.0%	100.0%
% Men clients*	10.1%	29.9%	0.0%
Clients’ retention rate (%)	81.4%	66.8%	70.4%	79.9%
Clients insured	1’928,627	238,361	62,166	2’229,154
Average loan	9,824	15,267	5,024	9,999
Amount disbursed (millions)	75,376	6,812	1,016	83,204
% of annual growth in disbursements	1.9%	34.1%	11.3%	3.5%
Non-performing loans ratio	2.66%	5.65%	4.97%	3.28%
Non-performing loans	504	270	11	785
*The remaining 0.1% corresponds to clients with legal personality.

Mexico Credit clients
Market	Total number of clients	Products	Number of clients per product	Percentage of clients against market
Women’s group market	1’762,377	Crédito Mujer	1’733,404	67.4%
		Crédito Adicional*	222	0.0%
		Crédito Crece y Mejora CM*	28,751	1.1%
Mix group market	08,705	Crédito Comerciante	708,705	27.5%
Mix individual market	101,465	Crédito Individual	101,465	3.9%
	1,414	Crédito Crece y Mejora CCR*	1,414	0.1%
Total	2’573,961		2’573,961	100.0%
*Only clients

Notes:
Compartamos S.A. only has one product addressed to women (Crédito Mujer). Loans have been granted to different areas, among them: manufacturing, farming and cattle raising, services, textiles, food, clothes, commerce, industry and fishing. Scope: Compartamos.

Savings

Saving in Compartamos Banco holds a double objective: generate additional value to clients aiming to save and addition a funding method for the institution.

During 2014, the existing savings’
clients increased 31.6%

Insurance (Aterna)

All policies developed by Aterna include a life insurance. Moreover, Aterna has designed products with additional coverage in health or damages to supplement the value offered to its clients.

Aterna verifies that its products have the SUAVE characteristics (Checklist for Microinsurance Products), so they must be simple, understandable, accessible, valuable and efficient.

Aterna	2013	2014	Variation
Employees	32	25	-21.9%
Distribution channels	5	8	60.0%
Accidents covered	4,225	7,581	79.4%
Insurance paid to beneficiaries (millions)	96	112	16.6%
Total intermediated premium (millions)	360.4	495.2	37.5%

During 2014, Aterna designed and launched new voluntary insurance products for Compartamos Banco to attend in a better way clients’ needs. With this strategy, it developed an insurance for each product:

• Crédito Mujer – Seguro Mujer
• Crédito Comerciante – Seguro Comerciante
• Crédito Individual – Seguro Individual

Each of these insurances has the added value of health coverage, like cancer diagnosis or heart attack, and has telephone assistance services on medical, educational and legal subjects.

Payment channels (Yastás)

During 2014 Yastás focused on the clients’ redefinition. Previously it was about the final user. Currently, it is about the trader, the one behind the counter and whom Yastás supports to make him a better businessman and, along with financial education, help him achieve a profitable business.

Yastás has presence in 13 states of Mexico, classified in five regions:

Yastás Distribution by regions
Gulf	East	South	Metropolitan	Expansion
San Luis Potosi	Hidalgo	Chiapas	Mexico City	Oaxaca
Tamaulipas	Puebla	Tabasco	State of Mexico	Yucatan
Veracruz Puerto and Northern Veracruz	Tlaxcala	Southern Veracruz	Morelos

492 municipalities assisted; in 443 of them, loans’ payment of Compartamos Banco can be executed

The current commercial management in the five regions allows providing service through 2,745 affiliated points in the network. 2,000 are prepared to conduct Compartamos Banco’s financial operations, such as loans’ payment from amounts of PS. 2,500 to PS. 10,000; collection of payment orders amounting to PS. 10,200; deposits; cash withdrawal and balance checks form the Compartamos Personal Account.

Thus, Yastás has become a convenient channel, which works for great part of the clients in regions where it has presence, offering a nearby point to carry out financial operations, services payments and cell phones airtime.

Yastás	2014
States with presence	13
Issuers1	17
Benefited people2	818,598
Employees3	143
Active correspondents	2,745
1. Services can be paid through the affiliated correspondents in the Yastás network. 2. Service payment and financial operations categories are considered. 3. The number of employees in corporate offices is 51, salesforce, 92.

2015 goals:

• Modification of 3,500 stores to conduct financial operations
• 80% of financial correspondents with at least five financial operations per month
• 50% of financial correspondents with Internet connection
• 9.4% of Compartamos Banco’s operations carried out in December (loans)
• 19.4% of Compartamos Banco’s operations carried out in December (savings)
• Employee turnover rate not exceeding 35%
• Income per active financial correspondent of PS. 718, to December 2015, a monthly average of PS. 462
• Operating efficiency

Internet Loans (Mimoni)

In 2014 we acquired a share percentage of Mimoni, new business model whose objective is to provide loans and develop predictive algorithms for its use in the medium term. This business will allow Gentera obtain new technologic capabilities and have a new distribution channel for our products. Mimoni’s presence will only be in Mexico City, targeting adult men and women belonging to segments C and D.

Financial education

Financial education is one of the key elements for our actions and through which we seek to create human value for our clients. Our business model is based on personal and constant contact with our clients, therefore we are able to encourage a savings and caution culture through the use of our services; thus generating conscience to avoid indebtedness.

Since 2005, the Organization for Economic Cooperation and Development (OECD) has invited several public and private institutions to carry out financial education actions, and has stressed the importance of citizens having information for financial decision making. In 2013, the World Bank conducted a study about financial capabilities, where Mexico has a significant challenge so the population manages its finances better.

For this reason, Gentera is part of the banking institutions who works for financial education, through Compartamos Banco since 2009. Currently, Compartamos Financiera and Compartamos S.A. also have each financial education programs.

Providing financial education to people in the bottom of the pyramid who use financial services has a positive impact on the communities where we operate, since they have further information about the products they purchase. Its importance lies in the pursuit of financial capabilities’ development through training and informative strategies among employees, clients and the community; which contribute to accurate decisions in resources’ management and use of financial services responsibly, motivating theirs and their families’ wellbeing.

To guarantee the development of financial education actions within our financial products, we established a process to identify and define the contents for the programs that will be imparted to the Group’s clients; such process consists of:

• 1.Conduct a diagnosis study to identify our clients’ financial education needs
• 2.According to the study’s results, the content to insert it in the credit methodology is designed
• 3.Carry out an experimental test to identify adjustments in the content
• 4.Once the content is adjusted, training is implemented and made accessible

Our goal is to create financial capabilities within the family core, this way facilitating the application of healthy finances in daily life, that benefit people’s life quality and planning of a secure future.

The training strategy includes the development of skills, conduct and competencies modifications, and fresh knowledge starting from several training actions. It is comprised by actions such as financial education workshops and courses for clients and employees focused on topics like expenses management, budgets, saving tools, credit management, insurances, investments and responsible consumption. Examples of these are the “Improving my personal finances” workshop –part of the Crédito Mujer methodology in Mexico, Peru and Guatemala– which entails imparting workshops of six sessions lasting 15 minutes each; and the “Manage your money” workshop, along with Yastás in Mexico. Additionally, along with Fundación NEMI, we carry out actions with the community that involve a conference cycle in public middle schools and theater plays in public elementary schools to strengthen a financial education and environmental protection culture.

Training actions by target audience:

• Employees
  • Induction for Crédito Mujer in Mexico, Peru and Guatemala
  • Personal finances training for regional instructors
• Clients
  • “Improving my personal finances” workshop for Crédtio Mujer clients in Mexico, Peru and Guatemala
• Community
  • “Sharing adventures” play in elementary schools
  • “Your life, your project” conference in middle schools

100% of Crédito Mujer promoters trained to impart the “improving my personal finances” workshop in Mexico, Peru and Guatemala

The informative strategy aims to provide useful and convenient information for financial decision making. We disseminate topics like budgets, savings, responsible consumptions, insurances, investments and advice on how to avoid indebtedness through printed magazines –Compartamos Consejos– for clients and –Compartips– for employees, besides electronic content in the intranet and social media.

Impacts by publication:

• 625,315 impacted employees
• 1’594,634 clients
• 387,249 community

As part of the Crédito Mujer methodology, the financial education team monitored the branches which impart this workshop to supervise its implementation. In 2014, 98% of Mexico’s branches were supervised and the workshop was integrated to 46% of Peru’s branches and 100% of them in Guatemala. Also, to discover the workshop’s reach and effectivity, quarterly surveys were conducted through a call center, where clients shared their opinions regarding the “Improving my personal finances” workshop.

From our perspective, financial education is an inherent service in our products, same that we have designed to provide a specific social benefit, and which we apply in several business lines, achieving the inclusion of a greater number of clients in this dynamic.

Monetary value of financial education by business line
Products	Outlay
Crédito Mujer	$1’015,297.5
Crédito Comerciante	$103,250.0
Crédito Individual	$41,007.5
Training	$18,807.0
Insurance	$9,900.0

Client service and client protection

With the goal of fulfilling our purpose of generating social, economic and human value throughout Gentera and its companies, we permanently consider our Code of Ethics and Conduct and all guidelines included regarding human rights’ protection, information handling, anticorruption and nondiscrimination to control our daily relations with our clients.

Information about our products

Compartamos Banco has a sound process to inform clients about the characteristics and requirements in each product offered. For example, the products Seguro Mujer, Seguro Comerciante and Seguro Individual have information regarding procurement age; insured amount for decease and as advance payment for cancer diagnosis; option to protect a client’s relative; validity; payment methods; premiums due; insured amount’s percentage given to the beneficiary; whether or not a medical certificate is required and payment time in case of accident, once the documentation is delivered. It also includes information about medical, legal and educational assistance; medical and academic discounts and requirements.

The product Cuenta Personal Compartamos has information about the opening amount; opening applicable process fees; account management or minimum balance; billing statement fees; availability; means of disposal; annual interest rate and amount of withdrawals and balance inquiries without cost.

Additionally, the Bank has guides for each of its products addressed to all employees in Compartamos Banco who participate in each’s process. These guides include information like the product’s description; objective; benefits; characteristics; due dates; frequency; interest rate; fines; clients’ profiles; requirements; conditions; restrictions; recommendations; credit process; activities; rules that must be observed; policies and glossary, among other material.

Compartamos Banco carries out a constant improvement process in all its products, aiming to provide additional value and protect clients’ financial health. Therefore, it was awarded the Smart Campaign Certification, granted by MicroRate. This entailed a review of all policies and procedures including site visits, interviews with employees and focus groups with clients to identify evidences on the compliance of the Client Protection Principles in all institutional guidelines, systems, organizational culture and employees’ behavior:

• Appropriate design and distribution of products
• Indebtedness prevention
• Transparency
• Responsible prices
• Fair and respectful treatment
• Clients’ data privacy
• Grievance mechanisms

The general results were:

• The Bank offers several financial products which adapt to the client’s profile, according to feedback obtained directly from clients, market and desertion research
• It uses the Clients’ Protection Index as an internal control mechanism focused on the client, measuring the compliance level of clients’ protection standards and best practices, same which are monitored by several areas through the Balance Scorecard and supervised by the Government Board as an institutional goal
• It conducts an appropriate indebtedness prevention with risk research; credit origination policies; promoters certification; evaluation of branches and client groups through internal audits to verify the methodology’s compliance; evaluation of the loan portfolio’s quality; analysis on the indebtedness evolution; clients’ payment behavior and capacity; monitoring of credit bureau’s information; financial education training and risk indicators’ annual review. Besides, these topics are included in the Upper Management and Government Board’s agenda permanently
• Manages its products with transparence and conveys to clients the main conditions and characteristics of each through contracts, brochures, websites and verbally
• It has responsible prices and rates based on payments behavior and groups seniority; has excellent levels of operating efficiency, exceeding those of the Mexican market; does not charge penalties for advance loans payment
• Has an outstanding Code of Ethics and Conduct, applicable for employees in their daily activities, guaranteeing the appropriate treatment for clients, besides transmitting it to its suppliers; it includes the collection best practices within its products guides
• Manages appropriately the clients’ privacy data, through a specific area which raises awareness, trains and educates personnel regarding the confidential management of clients’ information. There is controlled access to information in all the institution; it has privacy notices in all contracts and loan applications
• It has a grievance mechanisms such as a specific free telephone line and email for complaints management; a specialized unit to complaints resolutions (Call Center); verification calls to ensure the complaint has been resolved; monthly reports according to type and response time for complaints resolution

Clients’ privacy

At Gentera and its companies we safeguard all clients’ privacy, in compliance with the Federal Law on Protection of Personal Data held by Private Parties (LFDPPP) and its regulation, applicable in Mexican territory and published on July 5, 2010 in the Official Journal of the Federation. This regulation’s purpose is the protection of personal data held by private parties, in order to regulate its legitimate, controlled and informed processing, to ensure the privacy and the right to informational self-determination of individuals.

By complying with this law, we generate a strong trust bond with our clients; however, since it’s a rather new law, it is not of general knowledge and interest, even when the Federal Institute for Access to Public Information and Data Protection (IFAI) has conducted a sound broadcasting campaign since its publication.

Since the law’s publication, at Gentera we allocate financial and human resources to monitor its compliance, starting with reviewing the implications, as well as the new obligations the regulation establishes, with the goal to initiate the appropriate actions. Therefore, an external consulting agency was hired to help with the development of the procedure to identify risks and their rate, as well as action plans (risk treatment plans) with recommendations and measures to correct weaknesses in regards to personal data protection. From this project proceeded the creation of an inventory of personal data and related information assets to implement the corresponding operating procedures to properly comply with the law.

As a result of this procedure, we currently have several elements to observe this topic, such as institutional policies –information privacy policies manual; information security standard for the classification of information assets based on privacy; attend to ARCO1 rights request; comply with internal clients’ requirements; cancel, block or eliminate personal data; develop and maintain privacy regulation; observe information privacy infringements; manage personal data inventory– and the process for addressing owners’ rights. Additionally, we include data protection topics in our Code of Ethics and Conduct and hold public privacy notices in the intranet and websites of Gentera and its companies, communication, training and awareness programs.

All these tools –applicable in Mexico– allow us to manage appropriately both positive and negative impacts through the Information Privacy Management and Privacy Official, who are responsible to observe the compliance of the law and guarantee the informational privacy and self-determination of owners, by means of work plans, reports and operative records, jointly with verifications conducted by Internal Audit.

We recognize our clients’ value

The recognition of our clients’ loyalty is of the upmost importance for Gentera. To achieve this, Compartamos Banco has implemented several initiatives which promote interest in the community and family interaction.