Source: Inter-American Development Bank.
Original news wire here.
Asuncion, Paraguay, October 10 – Peru has the best business conditions for microfinance in Latin America and the Caribbean, according to the results of the Microscope index presented today by the Inter-American Development Bank (IDB), Corporación Andina de Fomento (CAF) (CAF), and the Economist Intelligence Unit (EIU).
The EIU, a specialized service of the prestigious magazine The Economist, developed the Microscope index last year with support from the IDB’s Multilateral Investment Fund (MIF) and CAF. The index consists of a scorecard that weighs factors such as the investment climate, the development of public institutions and the regulatory frameworks for microfinance in 20 countries in Latin America and the Caribbean.
The results of this year’s study, which was broadened to include more countries and deepened to survey more experts and practitioners, were discussed at the Microenterprise Forum organized by the MIF and the Paraguayan government, October 8-10.
According to the index, Peru overtook Bolivia as the best rated country. Ecuador kept third place, followed by El Salvador and Colombia. At the other end of the ranking are Haiti, Argentina, Uruguay, Venezuela and Jamaica.
“The Microscope shows that improvements, as well as slippage, can occur in countries from one year to the next. This is particularly the case in the regulatory framework,” said EIU senior analyst Robert Wood.
Changes in the regulatory framework are key drivers in affecting the overall scores and position of several countries, notably Peru and Colombia which improved this year. This underscores the importance of having knowledgeable, specialized regulators and political commitment to promoting microfinance as a commercial activity,” he added.
CAF’s director for SMEs and Microfinance, Alejandro Soriano, stated: “This new edition of the Microscope allows us to better gauge the kind of support our countries require to promote microfinance and development in the region.”
“The report is particularly timely, given what is happening in the global financial markets, and will help guide decisions towards building on this industry’s strengths and finding solutions to its weaknesses,” he added.
The Microscope’s findings confirm that ideal conditions for microfinance differ from those usually taken into account for conventional investments. Many of the top-ranked countries that are less prosperous than their neighbors placed lower, such as Chile, Brazil and Costa Rica.
“These results underscore how widely the business climate for microfinance varies in this region,” said Sandra Darville of the MIF. “The Microscope helps us focus on the priority issues for microfinance in each one of our countries.”
The index considers 13 criteria that gauge the effectiveness of regulatory frameworks for microfinance, the degree of development of microfinance institutions and the investment climate in countries in Latin America and the Caribbean.
Based on those indicators, data from government and private sector sources, academic research, press reports, interviews with experts and practitioners, and evaluations using EIU proprietary methodologies, Microscope uses a 0-100 point system that allows for comparisons between countries.
This year’s edition features comments on the strengths and weaknesses of the climate for microfinance in Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela.
The report also includes an analysis of microcredit interest rates, a hotly debated topic at the forum. While interest rates are affected by many factors, the Microscope compared the spread between rates for commercial bank loans and credit from microfinance institutions.
The analysis pointed up a wide range in spreads, although in countries where microfinance is more developed and there are more competitors, interest rates tend to converge. In Colombia, for example, the spread was 0.6 percentage points, while in Mexico, where microcredit is still burgeoning, it reached 35 percentage points.
More than 1,200 delegates from microfinance institutions, credit unions, banks, social investment funds, foundations, central banks, regulatory agencies, governments and multilateral organizations are participating in the Microenterprise Forum.
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