Microfinance Niche for Spanish Banks in Latin America, an Andean Region Approach

This paper presents an overview of Latin American banks' growing involvement in microfinance. Latin American microfinance has grown increasingly diverse in terms of institutional types and products. Traditional and leading local banks as well as international banks  are offering more products and services, demonstrating deeper involvement. According to recent estimates, however, there is a huge gap between the current supply of financial services to microenterprises and the demand for them. There is no a unique model of Latin American microfinance; but the approach of the microfinance cluster in the Andean region has proved to be a sustainable, commercially focused microfinance model. The paper recommends:

• Replication of the Andean model when a microfinance venture is directed to other countries in the region;
• Consideration of the regulatory framework, degree of local financial market development and macroeconomic conditions of each country in the downscaling programs of banks. 

Banks that are successful at microfinance have built their programs on a sound business case, and operate in environments that are conducive to commercial microfinance. The paper concludes with analyses of the microfinance approaches of two Spanish banks in Latin America, namely  BBVA and Santander.