Microfinance Issues and Challenges in the Anglophone Caribbean
Why the emphasis should be placed on developing new products and methodologies to serve SMEs
- Describes the microenterprise and microfinance sectors of seven English-speaking Caribbean states;
- Examines main constraints on the development of a well functioning microfinance market in these countries;
- Highlights the amount, type, and results obtained in microenterprise projects financed by the Inter-American Bank in the last fifteen years.
The paper suggests that English-speaking Caribbean microfinance organizations have not attained as much success in client outreach and sustainability compared to Latin American counterparts due to:
- Higher levels of economic and financial stability and socio-economic development and a strong government presence in microfinance;
- Heavier and more sustained reliance on subsidies among practitioners and policymakers.
The author argues that this differing context should be taken into account in the design of strategies promoting microfinance in the Caribbean and concludes with a number of potential strategic interventions:
- Educating public sector policymakers and MFO managers about appropriate interest rate policies;
- Creating more favorable conditions for sustainable microfinance (e.g. improving secured transactions frameworks and building credit bureaus);
- Encouraging existing commercial banks and finance or trust companies to down-scale and penetrate microenterprise markets;
- Strengthening existing institutions in order to achieve a "breakthrough model" of commercially sustainable microfinance;
- Promoting the creation of new institutions dedicated to microfinance.
Finally it states that the English-speaking Caribbean needs to take advantage of its relatively high level of economic and financial market development and develop new methodologies and products aimed at serving small and micro entrepreneurs.
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