What aspiring bankers can learn from microfinance in Central America

To teach the basics of commercial banking — and to instill some idealism in the next generation of lenders — one U.S. university is making Central American microfinance a part of its curriculum.

Marquette University’s commercial banking program is partnering with a microfinance organization that works with banking cooperatives in Panama, Honduras and Nicaragua.

One goal is to give students up-close experience in raising capital and making loans. But Kent Belasco, the director of the Marquette program, hopes that the coursework will also appeal to students’ social consciousness. The banking cooperatives are trying to build wealth in poor communities.

“To me, that’s a real win because a lot of my students go into bigger banks on the credit analysis side, and those banks all have international parts of their businesses,” Belasco said in an interview. “I want them to broaden themselves to understand what goes on in the rest of the world and how banking can really make a difference.”

Banking-focused college programs like Marquette’s are one answer to the industry’s perennial struggle for talent. Recruiters and bankers alike agree that commercial bankers are in especially short supply these days.

“Every year we think they can’t be more in demand than they are, and every year they’re more and more in demand,” said Cameron Boyd, director of the financial services practice at Smith and Wilkinson, an executive recruiting firm in Portland, Maine. “My personal opinion is the more credit training programs, the better.”

Marquette established a commercial banking program within its undergraduate business school in 2017. Since then, 45 students have graduated from the program, and another 11 are slated to complete their degrees next spring. Belasco claims a 100% success rate so far in placing his students with financial institutions.

He recently forged a partnership with Eskala, a for-profit microfinance firm that works with small banking co-ops in Central America. Starting in January, commercial banking students at Marquette will analyze loan portfolios and business plans for those co-ops.

Eskala grew out of Global Brigades, a non-profit student organization focused on reducing inequality. In January, Eskala spun off from Global Brigades as a for-profit because its founders wanted to be able to attract impact investors. The group raised $1.2 million in its seed round.

Eskala uses a model called micro-equity, said Colleen O’Brien, who is both its largest investor and its vice president of investor relations. The firm makes equity investments into local banking cooperatives, which then decide how to lend that money into their communities, often by offering credit to small business owners such as farmers and artisans.

Eskala’s structure is intended to address one common criticism of microfinance: that the profits made from loans in particular communities usually leave those communities.

Depending on the community, an investment might range from $500 to tens of thousands of dollars, O’Brien said. The banking co-operatives charge a monthly interest rate of 1.5% on loans, which range from $50 to $1,000.

As part of the course work for their loan portfolio management class, Marquette students will analyze the loan portfolios and balance sheets of some of the banking co-ops, as well as some of their clients, Belasco said. There will also likely be an internship component if international travel is safe by the summer of 2022.

The students will help develop business plans and meet with community members, said Dr. Shital Vora, CEO of Global Brigades.

“Not only do they get the principles, but they’re getting the human interaction with community members,” Vora said. “That’s something you can’t really get by reading a textbook.”

The fledgling partnership with Eskala bears some similarities to another partnership the Marquette banking program has with Town Bank in Hartland and the Wisconsin Women’s Business Initiative Corp., a local community development financial institution. Under that arrangement, students at the Milwaukee university work with local lenders to analyze applicants, present to a credit committee and underwrite loans.

Belasco hopes that by building these hands-on projects into the curriculum, Marquette can ultimately attract more students to its commercial banking program. In both cases, he said, the students get some diversity of experience and a view into what banking can actually do for a community.

“When you deal with some smaller enterprises, you can clearly see how the flow works, and it helps to sink in some of the concepts of banking: loans and deposits and other basics,” Belasco said. “It’s grassroots community banking.”

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