Partnership to Expand Sources of Funds for Rural Microfinance in Peru: The Case of Confianza

This study explores the ways in which a regulated MFI, Confianza linked with external partners to expand its sources of funds. It aims to examine how linkages between MFIs and other financial institutions can help expand service provision in rural areas. The study focuses on Confianzas organizational type and its potential to diversify sources of funds and compares it with a non-regulated NGO, Arawira to draw the following inferences:

• External funding sources are crucial for MFIs to sustain financial service provision and enhance outreach;
• Regulated MFIs have greater access to local and international investors;
• Trade-offs in terms of time and cost emerge when managing several linkages;
• Financial linkages do not guarantee large amounts of financial resources for lending to rural areas;
• Financial linkage conditions, amount and possible outreach may vary by type of partners and the specific requirements and perspective of the MFIs.

Given funding constraints that MFIs face, strategies to increase such resources in a sustainable manner will help facilitate growth and outreach objectives. Finally, management best practices are crucial to minimize risks and transaction costs in serving microenterprise and rural clientele.