Populist governments in Latin America are attempting to favor microborrowers by proposing interest rate caps and other public interventions, as is described in a recent article written by Ms Elisabeth Rhyne, managing director of the Center for Financial Inclusion at ACCION International, and published in the Huffington Post. [1]
In Nicaragua, delinquent account restructuring laws which purportedly favor the borrower have caused delinquencies to increase and eventually caused two Nicaraguan microfinance institutions (MFIs) to cease operations, according to Ms Rhyne. [1] An Ecuadoran policy incrementally reduces borrowers’ interest rates over time, which will decrease future revenues for MFIs in this market. In Bolivia, lower interest rates are being negotiated between the government and the microfinance industry.
Ms Rhyne argues that, although MFIs operating in these countries are continuing to develop ways to reduce costs and increase product offerings and thus revenue, continued negotiation between the microfinance industry and governments will be necessary to allow MFIs to continue providing value to communities while maintaining their own financial viability.
By Jennifer Shevock, Research Associate
About ACCION International:
ACCION International is a private, U.S.-based nonprofit organization with the mission of giving people the financial tools necessary for poverty alleviation such as microenterprise loans, business training and other financial services. ACCION’s total assets were USD 122 million at December 31, 2008.
Sources and Additional Resources:
[1] “Microfinance Among the Populists” June 11, 2010. http://www.huffingtonpost.com/elisabeth-rhyne/microfinance-among-the-po_b_609167.html
MicroCapital Universe: Accion International: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=ACCION+International
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