Microfinance in Bolivia: History and Current Situation

This paper discusses the negative economic environment in Bolivia and the efficiency of the microfinance institutions (MFIs) in coping with it. Using the consolidated data from four major MFIs, the paper brings out the effect of the economic crisis on the microfinancing system in Bolivia:

• Significant reduction in the number of clients due to the elimination of doubtful clients from portfolio;
• Deterioration in the quality of the portfolio;
• Considerable decrease in profitability.

The paper cites the important reasons for survival of MFIs in the existing negative environment:

• The adequate regulatory framework;
• A dynamic market;
• High levels of demand coverage;
• Existence of several private institutions.

Further, the paper informs that there are factors indicating that MFIs have faced the crisis better than traditional financial system. For the MFIs:

• Significant growth in the volume of intermediation;
• Portfolio quality better than the traditional banking institutions;
• An increase in economic efficiency.

The MFIs underwent major changes to face the crisis as compared to the traditional financial system:

• Extension in assisted market segments;
• More diversification of credit products;
• Larger supply of non credit financial products and adjustment of credit technologies;
• Changes in profile of human resources and services rendered to the clients;
• More importance given to marketing and publicity.

The paper concludes that the Bolivian institutions have attained larger leadership in Bolivian market as financial intermediary and in providing other services.