Rob Katz

Prodem Sold to Venezuela Under a Cloud of Intrigue, Irony

Prodem branchProdem, the 3rd largest microbank in Bolivia and a long-time BOP success story known for its home-grown smart ATMs, now finds itself at the center of a political-economic power struggle between Bolivia and Venezuela.? Yes, the socialist/populist governments of Evo Morales and Hugo Chavez are–ironically–at odds over the future of the region’s banking landscape, and it’s mostly because of the shrewd maneuvers of Prodem’s founder, Eduardo Bazoberry.

NextBillion ally and Microcapital blog author David Satterthwaite caught up to Bazoberry at last week’s Goldman Sachs/Women’s World Banking meeting in New York City.? There had been rampant speculation that Prodem was up for sale, and David was able to get Bazoberry to confirm that yes, Prodem has in fact been sold, and that the buyer is an investor wholly controlled by the Venezuelan government.? According to Microcapital, Bazoberry told him that the Morales administration threatened to put Prodem out of business by targeting its lucrative rural lending market; as such, he had no choice but to sell or be forced out.? Ironically, fellow socialist/populist Hugo Chavez must have approved the purchase of Prodem from under Morales’ nose–Venezuela had to have known that it was offering Bazoberry the highest price.That Bazoberry was forced to sell Prodem in the first place is ironic.? Bazoberry and Prodem represent one of the pioneers of the microfinance movement, successfully operating in one of Latin America’s poorest countries by serving poor, rural, indigenous customers using cutting-edge technology.? This is the exact constituency (poor, rural, indigenous) that lifted Morales and his populist party to power–yet his administration has forced a good local service provider out of business.? This is a risky political move; if the government-run banks don’t serve the BOP as well as Prodem did (doubtful, if history is any guide), voters may remember and Morales could find himself in a lot of political trouble.

The Venezuelan angle makes this story even more interesting.? Bolivia and Venezuela claim to be close economic allies; if that were really the case, why would Chavez come in to compete against Morales’ state-run banks?? Will Prodem–financed by Venezuelan petrodollars–offer basement rates that undercut the market?? That remains to be seen, but Latin American governments and the microfinance community will be watching this one very closely.? There’s a lot at stake–customers, sensing politics at play, could start defaulting on loans, which could scare away investors, which could push governments further to the left as they struggle to serve low-income communities.

For now, however, we will wait and see.? Prodem will always be known as the inventor of the fabulous smart ATM–now being copied by Citibank to fuel its global expansion.? Its technical and operational legacy will surely outlive its current status, and those of us in the BOP community will probably always associate Prodem with BOP banking.