Microfinance Industry Strengthened for Access of the Poor to Financial Services - Latin America and the Caribbean (LAC/RSD)
This paper asserts that although numerous microfinance service providers in the Latin America and Caribbean region and have achieved a level of full financial sustainability and are no longer dependent on donor funds, a deeper analysis reveals a fragile microfinance sector highlighted by the fact that under five percent of potential microfinance clients are being served in the region.
Emphasizing the fact that the microfinance sector in the region is at an intermediary stage where requirements for technical support are much higher than financial support, the paper explains the maturing process of microfinance institutions (MFIs) and lists the following as salient issues for a mature MFI:
- Operational efficiency including technical innovations;
- Diversification of products and markets including new product development.
The paper proposes that for a market with mature MFIs, a different set of supporting interventions have to be developed:
- Creating a regulatory/supervisory framework;
- Creating microfinance credit bureaus;
- Strengthening human resource capabilities;
- Developing a framework for secured transactions;
- Building the capability of MFIs to self evaluate.
Describing the role of agencies involved in microfinance promotion, the paper describes the activities and outcomes thereof for a strong microfinance sector in the region:
- Increasing knowledge of regulatory and supervisory functions;
- Applying the understanding of the role of credit bureaus;
- Improving human resources of MFIs;
- Increasing efficiencies in MFIs through the design, testing and dissemination of new technologies in credit operation;
- Standardizing the rating of MFIs;
- Disseminating savings mobilization best practices.