MICROCAPITAL STORY: Peru and other Andean Countries Ranked Best for Microfinance within Latin America and the Caribbean, according to the IDB, CAF and EIU’s Microscope Index.

The Inter-American Development Bank (IDB), Corporación Andina de Fomento (CAF), a Latin American multilateral institution, and the Economist Intelligence Unit (EIU), a specialized information service, have partnered together to report on the conditions of microfinance within Latin America and the Caribbean. The report highlights the results of the EIU-developed Microscope index – a tally of weighted factors relevant to the industry, and was presented at the Microenterprise Forum held in Paraguay this past month.Based on 13 factors, which include the investment climate, public institutions and regulatory frameworks in microfinance for 20 Latin American and Caribbean countries during the past year, Peru was ranked as having the best microfinance business conditions, overtaking Bolivia’s score from the previous year. It was determined that the regulatory frameworks are key drivers in the overall scores of the countries, and improvements in these can shift the rankings from one year to the next.

“This underscores the importance of having knowledgeable, specialized regulators and political commitment to promoting microfinance as a commercial activity,” said EIU senior analyst Robert Wood.

After Peru and Bolivia, Ecuador takes third place in the rankings. Uruguay, Venezuela and Jamaica, however, ranked as the bottom three. Peru is considered to have a promising growing banking market, as about half of all working Peruvians do not have bank accounts. Furthermore, loans to small businesses have been tracked as drivers of future credit growth. About 80 percent of all the country’s exporters are classified as small companies; many which show a need for loans. Peru’s regulation environment has also kept default rates low, a key factor in promoting lending and deposits within the banking sector.

For more information on the Microscope index and the IDB’s Microenterprise forum, please refer to this previous MicroCapital article.

By Yrenilsa Lopez, Research Assistant

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