LatinFinance - November/December 2016 - 32

BANKING
INNOVATION
MICROCREDIT

For years, Bolivia has pushed to make microfinance a part of the
country's financial mainstream. Now, several Latin American nations
are trying to follow in its footsteps. By Jason Mitchell

Blazing a path

H

ome to one of the world's most advanced microfinance industries, Bolivia has
become a model for other Latin American countries looking for ways to help low-income
earners start their own businesses.
Ten years ago, the Andean nation was one of the first countries in the world to commercialize microfinance when BancoSol, once a non-governmental organization but now the biggest
microfinance institution (MFI) in the country, started to offer loans to the poor.
Today, the industry is flourishing, with more than a million clients.
"Bolivia would be a very different country if the microfinance industry did not exist," says
Néstor Castro, president of the country's Association of Development Finance Institutions.
"Bolivia's microfinance industry was born at a time of great crisis in the 80s when there
was hyperinflation and high unemployment. People just could not get credit but then these
lenders started to help out."
Underlining its importance to the Bolivian economy, the country's microcredit portfolio
now amounts to $4.6 billion, almost a third of the country's overall financial system, according to the Bolivian Association of Financial Institutions Specialized in Microfinance, or Asofin.
In 2013, Bolivia implemented a new financial services law that called on financial institutions to increase the percentage of loan portfolios to productive projects and social housing
along with financing for rural communities.
The law established the concept of a regulated portfolio, or what the government described as lending with a social objective. For consumer banks, the level was set at 60% of
total lending and in the case of banks specializing in small- and medium-sized enterprises,
at 50%.
Consumer banks must allocate at least 25% of their portfolio to productive credit - financing that targets producers and complementary services that help production, including
tourism - and 35% to social housing. SME banks must grant 40% of their loans to productive
credit and 10% to social housing.
One of most important features of Bolivian microfinance regulation is its scope: the overall
financial regulator, ASFI, regulates the bulk of the MFIs in the country. ASFI oversees two
public banks, 13 consumer banks, three SME banks and 28 cooperatives and mutual societies.

32 L ATINFINA NCE.COM - November/December 2016

In most other countries in Latin America,
no one supervisory agency exists that covers all types of providers.
"This solid framework has provided
the basis for the industry's growth," says
Fernando Mompo, president of Asofin and
chief executive officer of Banco Ecofuturo,
an SME bank.
Looking to grow
Other Latin American countries - in particular Peru - also have well-developed
microfinance industries. Peru's industry has
a 3.5 million clients. MiBanco, which was
set up in 1998 and had 297,000 microcredit
clients in 2014, is the biggest provider.
Paraguay's microfinance industry is
smaller, but the country is bringing in new
regulations to strengthen the sector. In
March 2013, the Central Bank created a
special unit dedicated to financial inclusion,
whose goals are to improve financial education and banking penetration, and to help to
protect financial consumers.
In December the following year, its
government published a national strategy
for financial inclusion, a term that is used
interchangeably with microfinance and
refers to the delivery of financial services at
affordable costs to low-income people.
There are around 800,000 microfinance
clients in Paraguay, where microcredit is
defined as loans of up to $8,000.
The country's financial sector has expanded rapidly to a total credit portfolio of
$11.7 billion in July from only $1.2 billion in
2005, according to the Central Bank.
There are no official figures for the total
size of the microcredit portfolio but the


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Table of Contents for the Digital Edition of LatinFinance - November/December 2016

Contents
LatinFinance - November/December 2016 - Cover1
LatinFinance - November/December 2016 - Cover2
LatinFinance - November/December 2016 - Contents
LatinFinance - November/December 2016 - 2
LatinFinance - November/December 2016 - 3
LatinFinance - November/December 2016 - 4
LatinFinance - November/December 2016 - 5
LatinFinance - November/December 2016 - 6
LatinFinance - November/December 2016 - 7
LatinFinance - November/December 2016 - 8
LatinFinance - November/December 2016 - 9
LatinFinance - November/December 2016 - 10
LatinFinance - November/December 2016 - 11
LatinFinance - November/December 2016 - 12
LatinFinance - November/December 2016 - 13
LatinFinance - November/December 2016 - 14
LatinFinance - November/December 2016 - 15
LatinFinance - November/December 2016 - 16
LatinFinance - November/December 2016 - 17
LatinFinance - November/December 2016 - 18
LatinFinance - November/December 2016 - 19
LatinFinance - November/December 2016 - 20
LatinFinance - November/December 2016 - 21
LatinFinance - November/December 2016 - 22
LatinFinance - November/December 2016 - 23
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LatinFinance - November/December 2016 - 25
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LatinFinance - November/December 2016 - 31
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LatinFinance - November/December 2016 - 33
LatinFinance - November/December 2016 - 34
LatinFinance - November/December 2016 - 35
LatinFinance - November/December 2016 - 36
LatinFinance - November/December 2016 - 37
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LatinFinance - November/December 2016 - 47
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LatinFinance - November/December 2016 - 49
LatinFinance - November/December 2016 - 50
LatinFinance - November/December 2016 - 51
LatinFinance - November/December 2016 - 52
LatinFinance - November/December 2016 - Cover3
LatinFinance - November/December 2016 - Cover4
https://www.nxtbook.com/nxtbooks/latinfinance/0319QMR
https://www.nxtbook.com/nxtbooks/latinfinance/1218JYM
https://www.nxtbook.com/nxtbooks/latinfinance/paraguay_2018
https://www.nxtbook.com/nxtbooks/latinfinance/8320YTM
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https://www.nxtbook.com/nxtbooks/latinfinance/ecuador_20170910
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https://www.nxtbook.com/nxtbooks/latinfinance/200805
https://www.nxtbook.com/nxtbooks/latinfinance/200804
https://www.nxtbook.com/nxtbooks/latinfinance/200803
https://www.nxtbookmedia.com