Bolivia: an economy (almost) without state owned banks. Juan Antonio Morales Central Bank of Bolivia February 2005. Outline. Preliminaries A short history of SOB The transition The current situation. Preliminaries. At the end of the 1980s Bolivia had: 2 state owned “development” banks
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Juan Antonio Morales
Central Bank of Bolivia
At the end of the 1980s Bolivia had:
2 state owned “development” banks
1 “development bank” within the Central
1 state owned commercial bank
be explained by:
the SODB were in fact multipurpose organizations
with multiple stakeholders.
By mid 1990s, GD had become only a small player in the
The main perceived advantage of its credits was that they
But borrowers, in a era of abundant capital, underestimated
refinancing risks and preferred to borrow from the private
banks’ own resources.
(Banco del Estado) was:
Its loan portfolio was particularly problematic
The financial indicatorsof the SOB were
More importantly, the SOB distorted the financial market with their leniency toward delinquent borrowers. This represented unfair competition that inhibited the development of private banks. There was thus a negative externality
Loans from the SOB were considered, to a large extent, “grants”. This weakened market discipline.
There was also a significant degree of loan diversion.
The operations of GD were interfered by monetary policy considerations.
In turn, these operations impaired the effectiveness of monetary policy.
The transition with their leniency toward delinquent borrowers. This represented unfair competition that inhibited the development of private banks. There was thus a negative externality
The closure of the SOB was needed for the development of the banking system, but by itself did not improve the performance of the banking system as a whole. More was needed.
seemed at play.
In retrospect, better bank regulations and supervision of private banks were needed before the closure of SOB.
For a while there were second thoughts on the banking system, but by itself did not improve the performance of the banking system as a whole. More was needed.
liquidation of Banco del Estado.
Only when the banking services were outsourced by the Central Bank and the Ministry of Finance in an auction process, with strict elegibility criteria for participant banks, and a detailed contract, things improved.
The country is now better servedthan before the closure of Banco del Estado. The network of branches is now more extense, but the learning process took time and a significant amount of trial.
Our experience proves that if one can write a good contract, there is no need of a SOB to serve distant and rural populations.
Also, the credit needs of small farmers and merchants are now well taken care by the extraordinary expansion of the microfinance institutions.
FONDESIF, created initially as a fund to recapitalize banks in trouble, has shifted its operations to the refinancing of microfinance institutions.
It is evolving into a second tier SOB to refinance microfinance institutions.
The current situation now well taken care by the extraordinary expansion of the microfinance institutions.
The main remaining problem is the lack of long-term capital finance.
NAFIBO, to which the assets and liabilities of the Gerencia de Desarrollo, were to be transferred, has had a very slow take-off.