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Foromic closes with call to expand financial services into new and underserved markets

Microlenders, social investors discussed ways to extend services into rural areas, help women overcome challenges to grow their businesses, and promote responsible microfinance

SAN JOSÉ, Costa Rica – At the 14th Inter-American Forum on Microenterprise (Foromic 2011), leaders in the microfinance industry in Latin America and the Caribbean debated ways to increase access to financing in underserved sectors, particularly rural areas; and develop services and products tailored to meet the needs of low-income populations and micro, small and medium-sized businesses, especially those owned by women entrepreneurs.

“We must find better ways to help women achieve their full potential as entrepreneurs and community leaders,” said Nancy Lee, the general manager of the Multilateral Investment Fund (MIF, or FOMIN in its Spanish acronym), during the event’s closing ceremony, which had the participation of Luis Liberman, Costa Rica’s vice president, and other representatives of the Costa Rican government.

“We know this is a complex challenge. But at FOMIN, we are committed to attacking the challenge from a variety of standpoints,” Lee added, listing several MIF projects designed to benefit women entrepreneurs, from new savings products and innovative credit assessment tools, to programs that provide mentorship and business skills training.

During the three-day event organized by the MIF, the most important gathering of microfinance institutions in Latin America and the Caribbean, key industry players discussed the recent performance of the industry and upcoming challenges.

Developing innovative financial products that support growth in women’s businesses, as well as improving financial services and business opportunities for farmers and micro and small companies in rural areas emerged as crucial issues for creating sustainable economic growth in the region.

“Many of us are focused on pushing further into rural areas. And we must move beyond credit, to savings and insurance. There is no group that needs financial tools to smooth income variation more than farmers,’’ said Lee.

Microfinance industry

The call to expand financial services into new markets comes as the microfinance industry in Latin America and the Caribbean continues to post substantial growth rates, thanks to the emergence of strong institutions, sound regulatory systems, and client-focused operations.

The need to commit to responsible and transparent microfinance and to remain cautious about challenges such as over-indebtedness was a subject explored in depth throughout the event.

“If we are to encourage the creation and development of what some call ‘small and growing businesses,’ we need to better support entrepreneurs who are outgrowing what microfinance institutions can provide, but may not yet fit the typical business profile targeted by commercial banks,” said Lee.

According to the MIF, the industry grew 23 percent in 2010, at its fastest pace in four years, to $15.2 billion from $12.3 billion. It added 2 million new customers in 2010, nearly double the amount of new customers added in the previous year, serving a total of 12.5 million clients.

Latin America dominates global ranking

During Foromic, the MIF unveiled this year’s Microscope, a global ranking of 55 countries for doing business in microfinance. According to the study, prepared by The Economist Intelligence Unit, eight of the top dozen countries with the best business environment for microfinance are from Latin America with Peru and Bolivia leading the 2011 ranking. The strong results for the region are driven by elements that enable the microfinance business, particularly the existence of credit bureau infrastructures.

The MIF, CAF Development Bank of Latin America and the Netherlands Technical Assistance Trust Fund at the International Finance Corporation (IFC) provided support for the study.

The 2011 edition of Microfinance Americas: The Top 100 was also released during the event. The publication features the best microfinance institutions in Latin America and the Caribbean, using a ranking that combines multiple measures of microfinance performance such as outreach, efficiency and transparency.

Greater support for rural finance

During the event’s inauguration, IDB President Luis Alberto Moreno stressed the importance of supporting the development and growth of micro, small and medium-sized companies as a way to create economic opportunities for the poor and fight insecurity.

With the financing of seven new projects in Latin America and the Caribbean, the MIF will pave the way for developing new small business ventures in Central America, foster the competitiveness of micro and small companies in rural areas of Costa Rica and support innovative credit risk assessment tools that expand financing access to SME borrowers, including women entrepreneurs.

The MIF also will provide nearly $7 million in financing for three projects to increase and improve the offering of microfinance services to microentrepreneurs and small farmers in rural areas in Honduras, Guatemala, Costa Rica, and Nicaragua.

Foromic brought together more than 1,200 participants from financial and microfinance institutions, associations of microentrepreneurs, government agencies, universities, NGOs, and international organizations. Next year’s Foromic is scheduled to take place in Bridgetown, Barbados.

About the Multilateral Investment Fund

The Multilateral Investment Fund, a member of the IDB Group, supports private sector-led development benefitting the poor—their businesses, their farms, and their households. The MIF aims to give low-income populations tools to boost their incomes: access to markets and skills to compete in those markets, access to finance, and access to basic services, including green technologies.