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The Microfinance Experience in Latin America and the Caribbean

Microfinance in Latin America is seen principally as a means of channelling small loans to micro enterprises. This paper surveys recent trends in the region. The role of microfinance as a source of funding is very uneven. It plays a major role in some small countries, like Bolivia and the Central American economies, but is unimportant in the larger economies of Brazil, Mexico, and Argentina.

A dual process is evident in the sector, with NGOs upscaling by transforming into regulated financial institutions and commercial banks downscaling to address small borrowers. In terms of profitability, on average the more profitable microfinance institutions in the region are now performing more strongly than are commercial banks. The paper also describes recent initiatives in the sector by the Inter-American Development Bank.

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