Public Policy on Microfinance in South America
This paper analyzes the impact of public policies in South American countries on the development of microfinance. It compares existing regulatory frameworks for microfinance in the countries with best practices recommended by international agencies.The paper analyzes recent developments in microfinance in Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador and Peru and links them to existing policies and regulatory frameworks. It observes that public policies in each of the countries respond to contrasting approaches, with interventionist, pro-market and laissez-faire policies existing simultaneously. The paper identifies policy interventions that have the greatest impact on the development of microfinance. These include:
- Interest rate;
- Financial infrastructure measures for channelizing microfinance effectively;
- Participation of official banks;
- Credit guarantee systems.
The paper states that the effectiveness of public policies depends on socio-economic, geographic and cultural factors. Further, public policies can be used in different ways to build inclusive financial systems.