Codensa: Easy Credit for All

This case describes how Codensa, an electricity company in Bogotá and Cundinamarca, Colombia, developed an easily accessible consumer credit business model for low-income groups that capitalized on the cost structure of its core business. Codensa, through its Codensa Hogar division, provided consumer credit to low-income populations by connecting a value chain of major retailers and appliance manufacturers. Codensa entered this business as part of its commercial brand strategy, using its billing structure as a credit collection tool. During the first five years of the program, 95% of the 450,000 people who took out one or more loans belonged to the lowest economic class and were between 25 and 45 years old. 66% of Codensa users were people who did not participate in the formal banking system. After obtaining a credit history with Codensa, 45% of this population accessed other financial services. In five years, Codensa Hogar has surpassed the $ 250 million mark in its loan portfolio, granting loans up to three times the salaries of public utility bill holders. Almost 50% of clients applied for a new loan after completing their payments. In 2006, the unusual growth rates of Codensa Hogar worried shareholders. If this rate were maintained, the surplus from the electricity business would not be enough. Growing funds must be sourced from inside or outside the company. However, members of the finance department disagreed. They argued that the financing costs that Codensa had to pay to the utility should include an analysis of the risks assumed by the company. The difference between business and financial vision presented management with a multitude of challenges. This case can be used in intermediate courses on financial management and strategy, financial strategy and corporate strategy, or in courses on business models aimed at a “double bottom line”.

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