Microfinance in Latin America - Lessons for the Middle East?

The author states that there are four types of microfinance service providers in Latin America:

• Microfinance NGOs;
• Specially licensed microfinance institutions;
• Transformed microfinance NGOs;
• Commercial microfinance institutions such as public and private banks.

The author points out some of the other service related facts:

• Though NGOs make up about two thirds of the total number of service providers, they serve only 47 percent of the clients;
• Regulated institutions serve the remaining 53 percent of the clients and hold 75 percent of the total microfinance portfolio.

Some of the characteristics of the microfinance NGOs, as listed by the author, are:

• Some large institutions have chosen to remain as NGOs in spite of achieving high scale and sustainability;
• They are able to continue with their outreach to the less easily served clients;
• They are free to experiment and take risks;
• Their market is somewhat protected from competition.

According to the author, regulation has helped the microfinance sector in Latin America in the following ways:

• In the strong microfinance countries such as Bolivia and Peru, regulators have developed expertise in microfinance, have allowed both cooperatives and shareholder-based institutions to function and have freed interest rates;
• In slow microfinance countries such as Brazil and Mexico, some of the regulatory policies such as restricted interest rates are stifling.