IDB Underscores Support for Microfinance in Latin America in Face of Internation...

Oct 2008
Asuncion, Paraguay , October, 09 2008 - At Microenterprise Forum, President Moreno announces new fund for the region’s microfinance institutions.

The global financial crisis will pose major challenges for the microfinance industry in Latin America and the Caribbean, warned Inter-American Development Bank President Luis Alberto Moreno. In a speech at the opening of the 11th Microenterprise Forum, which is taking place here October 8-10, Moreno emphasized that this region’s microfinance institutions are already taking appropriate measures to face the crisis: adhering to strict standards of financial discipline, staying close to their clients and diversifying their funding sources.

“We’re in the eye of the storm, so it’s difficult to determine whether this financial instability will be temporary or whether it will cause lasting harm to Latin America and the Caribbean’s progress, as was the case during the foreign debt crisis of the 1980s,” Moreno said.

“But we’re confident because the region can face this turbulence from a solid position,” he added. “We’ve been gaining structural strengths that will enable us to deal with this turmoil on firmer ground.”

Moreno underscored the differences between the prudent practices of Latin America’s microfinance industry and the excesses of the U.S. mortgage lenders who issued credit recklessly without properly gauging their clients’ ability to repay their debts, causing the so-called subprime crisis.

Microfinance started nearly four decades ago as an experiment to provide small loans to poor people. In Latin America and the Caribbean this industry numbers some 600 institutions with more than 8 million clients. Last year the regional microcredit portfolio totaled about $9.2 billion.

In the short term, Moreno added, the main potential challenges to this industry are liquidity problems that could limit its access to funding, as well as higher levels of inflation, which erodes borrowers’ purchasing power, and exchange rate fluctuations that could lead to currency mismatches for microfinance institutions.

Moreno announced that the IDB’s Multilateral Investment Fund (MIF) is working on a $20 million financing facility to help microfinance institutions weather this crisis. Other donors could contribute additional resources to the facility.

Paraguayan President Fernando Lugo and Princess Maxima of the Netherlands also spoke at the opening of the Microfinance Forum, which has attracted more than 1,200 participants.

In her presentation, the Argentine-born princess, who is a member of the United Nations Advisory Group for Inclusive Financial Sectors, discussed what the Latin American microfinance industry could do to emerge stronger from this crisis, underscoring the importance of promoting savings.

“Now more than ever we know that savings protect us from economic risks and uncertainty,” said Princess Maxima, an economist who worked as an investment banker. “An increase in savings will finance the growth of microfinance institutions’ portfolios in a stable and well-funded manner.”

While the region’s microfinance institutions are attracting more deposits, Latin America and the Caribbean lag behind other regions in this measure, she added. At the end of 2006, only 18% of families here had some form of savings product, compared with 22% in Africa, 37% in Asia and 90% in OECD countries.

President Lugo, who took office in August, called on Paraguayan microfinance institutions to lend more support to small businesses, which generate 80% of the jobs in this country, and to women entrepreneurs. The president noted that Paraguay’s strong economic growth in recent years had done little to narrow inequality.


Research Analysis Tools

The fund indexes, institution benchmarks and other market information displayed here are all Symbiotics designed analysis tools, created in-house by our analysts and experts. Symbiotics has one of the oldest track records in microfinance investment analysis dating back to the late 1990s; its indexes and benchmarks have been regularly used as markers by investors, asset managers, financial institutions and practitioners. These, as well as several other research products, are available through the Research Account. Click on the link below to find out more.

Learn More