In 1997 a Citibank lending officer encountered an atypical loan application that proposed the securitization of a portfolio of small loans from Bolivia, a poor South American country. The bank offering the transaction was Banco Solidario S.A. of Bolivia (BancoSol). It had only been formed in 1992, yet by 1997 its 85,000 borrowers represented nearly 30 of the customers serviced by the entire Bolivian banking system. It seemed to defy economies of scale: despite having an average loan size of only $828, BancoSol appeared to be one of the most profitable banks in South America. In this case, students are asked to examine Bolivian economic statistics, Banco Sol client profiles, the terms and conditions of typical Banco Sol loan contracts, and Banco Sol's operation statistics and financial statements in order to determine the associated risk of granting such a loan.

Case id: 080331
Supplemental Material: Teaching Note