Microfinance: From Village to Wall Street?
By Tor Jansson (11/01, MSM-113, En) See also Microenterprise
This paper presents a synopsis of the current state of the microfinance industry in Latin America. It provides a rough assessment of the achievement and outreach of the industry; it offers revealing information on the financial performance of 20 microfinance institutions; and it outlines some of the major issues currently facing the industry. The underlying theme of the paper is the microfinance industry?s gradual integration into established markets and structures, specifically as it relates to financial regulation and supervision and the industry?s access to financial and capital markets.
The paper is written for people with a reasonable amount of financial literacy, but with limited knowledge of microfinance per se. However, even seasoned experts may find some parts of the paper interesting, particularly a section comparing the performance of microfinance institutions in Bolivia, Colombia and Peru to that of commercial banks. The reader will notice that microfinance institutions in those countries appear to defy the conventional wisdom, which says that they are particularly vulnerable to a deteriorating economic environment.
Finally, it is worth pointing out that the content and structure of the paper is partly a function of the fact that it builds on a chapter that was incorporated into the Bank?s yearly publication Economic and Social Progress in Latin America. The most significant change compared to that version is a more extended treatment of two of the three topics mentioned previously: the performance of microfinance institutions and the access of these institutions to commercial sources of financing. New data and discussion have been added to these sections to provide for a more nuanced analysis of the current state of affairs and the challenges ahead.
Last updated: 05/08/07
