Microfinance loans could offer more than 20 billion US dollar in credit to the poor in Latin America by 2012, up from 8,6 billion last year, as services expand and rates fall, Inter-American Development Bank (IADB)s Multilateral Investment Fund Manager, said at the banks annual meeting in Miami.
Up to 600 microfinance institutions served 8 million clients last year in Latin America, up from just 2 million and a portfolio of 1 billion dollar in 2001, the bank said in a report covering 25 countries. Average loans ranged from 748 to 1.337 dollar.
Microfinance institutions in only a few countries, such as Bolivia and El Salvador, had interest rates of less than 25 percent. The interest rates charged by such institutions in Paraguay and Mexico exceeded 40 percent, with an average rate in Mexico last year of 64,9 percent. Mexican rates had been about 80 percent two years earlier, but needed to come down further.
Potential demand, nevertheless, remains “immense and still largely unsatisfied”, the IADB said. Often this is the borrowers only source of credit, and it does not come cheaply. On average, interest rates on those loans are about six percentage points higher than on commercial bank loans, the IADBs report said, citing 2006 data.
That number might be higher, but is distorted somewhat by exceptions such as Ecuador, where microfinance loans come at a discount of about 11 percentage points from the traditional banking sector, and Paraguay, were the discount is 40 percent.
The IADB said there is wide disparity in the way countries in the region have adopted microfinance initiatives. Smaller countries such as Bolivia, Peru, Ecuador and El Salvador have made more progress than larger economies such as Argentina, Brazil and Mexico.
Financial inclusion of the poor has become one of the pillars of the IADBs efforts to eradicate poverty in Latin America and the Caribbean and this theme took on special relevance at this years annual Meeting.
IADB President Luis Alberto Moreno said at a seminar titled “Making People Count – Transforming the Financial System to Reach the Poor” that the most costly credit is that which people are unable to access, and that the capacity of the regions financial system must be enhanced so that banks can provide even greater financing to micro-businesses.
Peru, along with Bolivia, Ecuador and El Salvador, stand out in Latin America for the favorable business climate that exists for micro credit, according to the study by the Economist Intelligence Unit, prepared with the support of the IADB and the Andean Development Corporation, or CAF.
Kilde: www.worldbank.org
