ECON 465March 5, 2009

Catherine NguyenSamuel Oh

What is microfinance?

Origins Institutions Jobs Benefits Examples Current Conditions Future Prospects Concerns

Microfinance is defined as financial services for poor and low-income clients.

Microfinance is a movement that will help low income families have access to financial institutions.

Microfinance clients are poor and have low-incomes.

Microfinance clients tend to be below the poverty line.

Many households are without financial access.

Most microfinance intuitions started as not-for-profit organizations.

ACCION Communitaria del Peru (ACP)ACODEP, NicaraguaACTUAR/Tolima, ColombiaADMIC National, A.C., MexicoAgencia de Desarollo Economico

Local de Morazan, El SalvadorAsociacion Benefica PRISMA, PeruAsociacion de Mujeres Campesinas

Salvadorenas, El Salvador

Microfinance can provide a range of benefits that poor households highly value.

Microcredit improves lives.

Other microfinance services include…

Report from Economist Intelligence Unit, Oct 2008.

Overall portfolio value increase since 2001: from $1.19 bn to $9.25 bn.

34% growth/year.

Rank Score*Change on

20071 Peru 76.6 +2.52 Bolivia 74.4 -5.03 Ecuador 69.7 +1.44 El Salvador 59.0 -2.55 Colombia 58.6 +12.56 Nicaragua 58.0 +4.27 Guatemala 54.0 +10.08 Paraguay 49.6 -3.39 Dominican Republic 48.0 -9.5

10 Mexico 47.5 -0.8Panama 47.5 new

12 Honduras 47.1 new13 Chile 43.2 -5.114 Brazil 41.6 -1.715 Costa Rica 40.3 new16 Haiti 30.2 new17 Argentina 28.5 +1.718 Uruguay 28.3 -7.519 Venezuela 24.9 -2.520 Jamaica 21.2 new

Bright in current financial markets.

Typical repayment rates are 95-98%.

Not a solution to poverty.

CompartamosBanco listed its shares for $1+ bn in 2007.

Legal Loan Shark? Average interest

rates 79%+. Exploiting the

financial ignorance of customers?

Allowing open market to meet needs.

Microfinancing is labor-intensive.

Entice competitors and lower interest rates (115% seven years ago).

Financial Literacy courses to clients.