Bolivia During the Global Crisis 1998-2004: Towards a Macroeconomics of Microfinance
This paper uses a case study of the Bolivian microfinance industry during the Bolivian crisis from 1998 to 2004 to explore the macroeconomic role of microfinance.
The paper examines indicators for macroeconomic and microfinance performance for Bolivia from 1997 to 2003. It discusses strategies adopted by the state, MFIs and small businesses for coping with the Bolivian crisis. The paper presents a model representing linkages between macroeconomic factors and microfinance. The model consists of a chain featuring the following six links:
- Macroeconomic policy;
- Consumption and imports;
- Behavior of MFIs;
- Behavior of clients;
- Inequality and poverty;
- Composite effects of microfinance.
The paper compares the case of Bolivia with the performance of the Indonesian microfinance industry during the macroeconomic crisis of the late 1990s. Lessons from the Bolivian experience include the insufficiency of a move up-market by MFIs in protecting portfolios, role of insurance institutions in encouraging investment among poorer clients and the opportunities for NGOs to take advantage of prudential restrictions to mobilize savings.
