Past Winners

Medellín, Colombia : 2016 WINNER

Medellín: Enabling Neighborhood Loan Funds, Reducing Illegal Lending

  • 2,441,123

    Population (municipality)
  • 3,731,447

    Population (metro)
  • Federico Gutiérrez

    Mayor
  • Spanish

    Official Language
  • Directly elected mayor (four-year term)

    Type of Government
  • Additional facts

    Colombia’s strong financial sector contributed to its 4.55 percent GDP growth in 2014, the second-best rate among Latin America’s top 10 economies

The Problem

Almost 400,000 disadvantaged people in Medellín have no access to the formal banking system and, instead, take out illegal loans connected to organized crime. While these illegal loans, called “pagadiarios,” are marketed as a means to support employment, cover life-threatening needs, and meet daily needs, they subject the city’s poor to a stubborn circle of poverty, charging interest rates of up to 700 percent annually. This corrupt system uses violence and intimidation as a collection tactic, targeting those who are the most vulnerable and marginalized from the financial system.

The Innovation

The city is tackling these challenges through Bancuadra, “the world’s smallest bank.” Bancuadra provides low-income residents with access to credit, loans for work materials, and a jobs bank, with no complex procedures or requirements to join. Neighbors can make withdrawals at authorized central locations in their own neighborhood.

Bancuadra is innovative because it uses community trust as collateral. Networks are created by people who know each other and are available to serve as guarantors of loans. By doing so, the system reduces asymmetry of information between lender and borrower, providing financial access to many more people at affordable rates. The program also provides critical financial education to users, giving them access to best practices in money management.

The Impact

Bancuadra has disbursed over 12,000 loans. The program has substantially decreased loan costs, reduced violence, and given residents access to a robust program of financial education. Building on early successes, the team is preparing to roll out the program at scale across the city.


  • Additional facts

    Colombia’s strong financial sector contributed to its 4.55 percent GDP growth in 2014, the second-best rate among Latin America’s top 10 economies

Related Links