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Peru ranks first in new global index on business environment for microfinance

AREQUIPA, Peru – Peru has the best global business conditions for microfinance, according to the results of the 2009 Microscope Index, released today by the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB), the Corporación Andina de Fomento (CAF), the International Finance Corporation (IFC) and the Economist Intelligence Unit (EIU).

This is the second year in a row that <?xml:namespace prefix = st4 />Peru tops the charts as Microscope's best rated country. Until last year, the index covered 20 countries in Latin America and the Caribbean. This year, the index ranks 55 countries worldwide and Peru's leadership has gone global.

The best ranked region is Latin America, reflecting the commitment to microfinance in countries throughout the region. Bolivia holds second place among ranked countries worldwide, and a total of six Latin American nations are among the top 10 performers—Peru, Bolivia, Ecuador, Nicaragua, Colombia and El <?xml:namespace prefix = st3 />Salvador.

The Philippines, ranked third worldwide, is the strongest finisher outside of Latin America, followed closely by India, in fourth place. The top African countries are Ghana, in fifth place, and Uganda, in ninth.

The index will be presented at the 2009 Microenterprise Forum (Foromic), taking place in Arequipa, Peru, September 30th - October 2nd.

The Microscope Index was developed in 2007 by the Economist Intelligence Unit, the business information arm of The Economist Group, with support from the MIF and CAF. After two years, IFC, with support from the Dutch government, joined the effort, giving the index an extra push to make it truly global.

“Expanding the Microscope opens a window onto the ways countries innovate in microfinance and reveals the areas where improvements need to be made,” said Vanesa Sanchez, Research Manager for the Economist Intelligence Unit. “By considering industry business practices and market development as well as legal frameworks, it should be a valuable tool for policy makers, industry practitioners, donors and investors.”

The index consists of a scorecard weighing 13 indicators grouped into three categories: regulatory framework, investment climate, and institutional development. The countries were selected based on the importance of their existing microfinance sectors or their potential for development. However, since the global index builds on earlier studies conducted exclusively in Latin America and the Caribbean, the region is somewhat over-represented, with 21 of the total 55 countries. The index includes data from 12 countries in Sub-Saharan Africa, seven in Eastern Europe and Central Asia, seven in East Asia, five in South Asia, and three in the Middle East/North Africa.

Cambodia and the Philippines ranked at the top in regulatory framework, while Chile led the investment climate category. Bolivia and Peru tie for first place in institutional development.

“Over the last two years, the Microscope, focused in Latin America and the Caribbean, triggered significant policy changes for microfinance operations,” said Julie T. Katzman, head of the MIF. “It is a tool that helps decision making, by providing current, comprehensive information  that enables the comparisons of policies and action across countries.”

Microscope 2009 is being presented “at an ideal time for taking sound decisions”, said Alejandro Soriano, CAF deputy director of SME and Microenterprise Promotion. “This report will be a reference guide to stay abreast of changes in the industry, so innovation can be enhanced and shared across the globe.”

“The broader reach of this year’s report gives us a better understanding of where microfinance is taking off and what makes that happen,” said Peer Stein, IFC Manager for Access to Finance Advisory Services. “Advancing the regulatory and institutional environment for microfinance in emerging markets is critical to building more inclusive financial markets that benefit all.”

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