Micro Enterprise, Development Review Vol.3 No.2
By SDS/MSM (12/01, En, Es) See also Microenterprise
Making Rural Finance Work
It is hard to make rural finance work, particularly when dealing with small
and microenterprises: information is scarce, risks are unique and transaction
costs are very high. Not surprisingly, therefore, the history of rural finance
in Latin America is littered with failed credit programs and financial
institutions. However, recently some institutions have found ways to overcome or
at least mitigate some of the daunting challenges characterizing rural markets.
This article describes how they have done it.
Attracting Social Investment Capital to Latin America
As the microfinance industry in Latin America continues to mature, its
demand for fresh funds is reaching new heights. Unfortunately, in many countries
microfinance institutions are experiencing serious difficulties in obtaining
sufficient amounts of financing from either donors or private markets. This
impasse could be largely overcome if just a trickle of the world?s latent
demand for social responsible investment - estimated at about $200 billion -
could be raised and channeled to Latin America and, more specifically, the
microfinance industry. So far, however, few socially responsible investment
funds have been able to attract and channel such financing. This article
explains why. It then outlines the contours of a new type of fund, a
"Venture Mutual Fund", that would enable and encourage larger amounts
of financing to be raised and channeled to developing sectors and institutions
in emerging countries, including the microfinance industry in Latin America.
To order a hard copy of this publication send us an electronic message, with your name and address at: sds/msm@iadb.org
Last updated: 05/08/07
