Paper
Crisis in Bolivian Microfinance
Reasons for the Bolivian microfinance crisis
This paper explores the reasons for the downfall of the once-flourishing Bolivian microfinance industry and suggests ways in which microfinance could learn from this experience.
Author lists the following reasons for the crisis in Bolivian microfinance:
- Competition with consumer lenders;
- Crisis of 1999 - 2000, in which clients started borrowing more than they could handle. They also started using the proceeds of one loan to pay off another;
- Debtors' revolt, which was organized by "professional" union organizers who gathered borrowers into debtors' associations to protest against consumer and microfinance lenders.
The paper concludes with the recommendation that microfinance lenders should:
- Rethink the public image of microfinance and the values it represents;
- Address the principal issues about micro lending, which are high interest rates and the consequences of default.
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