Private Enterprise and Financial Markets > Micro, Small and Medium Enterprise
Promoting Growth with Equity: The Inter-American Development Bank and Microenterprise
(04/98, En, Es)
Preface
In recent years the countries of Latin America and the Caribbean have implemented significant economic reforms and, as a result, are now experiencing dynamic transformation and growth. But a major problem remains: of 460 million people in the region, one-third live below the poverty line.
The reduction of poverty is at the very core of development. Hence, we must always focus attention on the parts of society where the big projects often do not reach and which do not automatically share in the benefits of overall economic growth. In this regard, the 150 million people currently working in small businesses and microenterprises in Latin America and the Caribbean merit special attention. The majority of these entrepreneurs are people who live below the poverty line, and more than half of them are women. Their businesses are found in both urban and rural areas and in all sectors of the economy. These people offer tremendous worth and potential to the region, for economic growth, for social development, and for employment.
However, only a small fraction of these microenterprises have access to institutionalized sources of financial services. This lack of access to financial services and other types of support holds back their growth and leaves their potential largely unrealized. Addressing this constraint remains one of the major challenges in microenterprise development today.
For a long time there will undoubtedly be a major role for the NGOs that operate outside the formal financial system but offer an important first step in organized financial and other forms of assistance to microentrepreneurs. My vision for the next century, however, is that microfinance can be provided by a broad range of formal financial institutions using funding sources over the range from local deposits, international bond offerings, securitization, international and local loans, all cushioned by a capital base provided by private investors through stock exchanges. Borrowers will have access to loans, credit cards, leases, and other products and, most importantly, there will be healthy competition in the sector.
The realization of this vision would help to unleash a major force for the social and economic transformation of Latin America and the Caribbean.
The Inter-American Development Bank will be there to help this process every step along the way.
Luis Alberto Moreno
President, IDB