Global Microscope 2012: Microfinance responds to call for responsible finance

Peru and Bolivia top ranking for best microfinance environment

Latin America has continued to improve its environment for microfinance, with Peru and Bolivia showing the biggest gains and leading the global ranking of 55 countries, according to the 2012 edition of Microscope, produced by the Economist Intelligence Unit.

Out of the 21 Latin American and Caribbean countries rated on the report, nine continued to improve their overall score. Peru ranked first for the fifth consecutive year because of its sophisticated legal and regulatory framework and competitive microfinance sector.

The study shows a clear commitment of governments and the industry itself in the region to address areas of great concern in responsible finance and client protection. Latin America showed progress and global leadership in areas such as price transparency, dispute resolution and quality of credit bureaus. Agent banking legislation and pilot testing also continues to improve as shown by changes in in Chile and Paraguay.

“Microfinance—as part of a larger financial inclusion agenda—is setting important new standards that will certainly help all types of clients of the financial sector. The level of depth of the microfinance sector’s response to the call for responsible finance is remarkable,” said Sergio Navajas, senior specialist at the Multilateral Investment Fund (MIF), a member of the IDB Group.

Covering the 12 months to June 2012, Microscope 2012 evaluates the microfinance sector across two distinct categories: Regulatory Framework and Practices, which analyzes areas such as regulation and supervision and rules for deposit-taking, and Supporting Institutional Framework, which looks into aspects ranging from financial transparency rules to credit bureaus, pricing and dispute resolution. The index also takes into account whether, and to what extent, political shocks have affected the microfinance sector and general country conditions.

Main highlights related to Latin America in this year’s report include:

  • Latin America ranks first in the category of Institutional Framework.
  • Peru is the only country in the region to achieve the highest score for its regulation of microcredit portfolios and overall capacity to supervise microfinance.
  • Chile jumped ahead in the ranking after agent transactions evolved from a pilot stage.
  • Bolivia, Peru and Chile continue to improve their regulatory frameworks for deposit-taking through the presence of prudent regulation.
  • The region showed continuous progress in credit bureau coverage and depth, particularly Bolivia and Peru.
  • Nicaragua passed a microfinance law that allows interest rates to be set freely, and establishes a new consumer protection law, among other developments.

About Global Microscope

The Global Microscope on the Microfinance Business Environment 2012 offers an in-depth analysis of the microfinance business environment in 55 countries.

The Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank Group; CAF Development Bank of Latin America and grant financing from the Netherlands Technical Assistance Trust Fund to the International Finance Corporation (IFC), a member of the World Bank Group, have provided financial support for the study.