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BOLIVIA Microfinance Development Overview National Roundtable Conference March 29-30 Davao City

BOLIVIA Microfinance Development Overview National Roundtable Conference March 29-30 Davao City. Map of Bolivia. LA PAZ. Bolivia: Profile. Population: 8.3 million Working Population: 2.9 million Informal Sector Popn: 2.5 million Urban – Rural Distribution:

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BOLIVIA Microfinance Development Overview National Roundtable Conference March 29-30 Davao City

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  1. BOLIVIA Microfinance Development Overview National Roundtable Conference March 29-30 Davao City

  2. Map of Bolivia LA PAZ

  3. Bolivia: Profile • Population: 8.3 million • Working Population: 2.9 million • Informal Sector Popn: 2.5 million • Urban – Rural Distribution: • Urban: 61% Rural: 39% • Bolivia is a very poor country. 63% of the population are poor. Source : INE 2001, Viceministerio de Microfinanzas, World Bank

  4. BOLIVIA: Informal Sector Indicator2002 Informal Sector Population: 2.5 MM Informal Sector as a % of Total Working Population:83% Contribution to GDP:20% - 30% Percentage of new jobs coming from informal sector:  90% (1992 – 1995) Source : INE, Viceministerio de Microfinanzas, CEDLA

  5. Micro and Small Enterprises Sector • The participation of micro and small enterprises (MyPEs) in the Bolivian labor market is 63%. • The MyPEs represent 95% of enterpreneurial units.

  6. HISTORY OF MICRO AND SMALL ENTERPRISES • Micro and small enterprises (MyPE) grew as a result of an increase in rural-urban migration, lay offs and a reduction in employment opportunities. • By the mid 80s – end of the 90s, the MyPEs were considered the main source of labor. • At the turn of the Millennium, the MyPEs became the main tool to fight poverty in Bolivia.

  7. BOLIVIA: The Beginnings of Microfinance Prior to the 1990´s: • MyPEs lacked access to credit at non-usurious rates • Physical collateral requirements for loans • Inappropriate loan terms and conditions (loan sizes too large, maturities too long) • Lack of regulatory approval of microfinance insitutions (MFIs) • Limited focus on savings products • Few market competitors ( 12) • Microfinance institutions, primarily NGOs, were dependent on donor funding.

  8. BOLIVIA: Microfinance Today • Today, micro & small entrepreneurs have access to credit in the formal financial system as a result of: • The simplification of the loan approval process • The appropriate design of collateral substitute • Adjustment of terms and conditions (smaller loan sizes and shorter maturities) • The success of PRODEM and BancoSol

  9. BOLIVIA: Microfinance Today • Greater competition in the market ( 60 formal competitors) • State policy to encourage microfinance for poverty alleviation • The introduction of specific regulations for MFIs by the Superintendency of Banks and Financial Entities (SBEF) • Conversion of NGOs to regulated Private Financial Funds • New funding sources for MFIs (savings deposits, commercial funds, private investors)

  10. Growth of Microfinance Institutions in Bolivia Portfolio Size (US$MM) Legal Institution Form (´02) 2003 1992 1994 1997 2000 BancoSol Banco 8.8 33.2 63.1 77.8 91.0 Caja Los Andes FFP 0.1 2.9 20.4 50.1 82.2 Prodem FFP n/a 2.6 18.2 23.6 62.0 FIE FFP 2.1 4.1 12.1 22.5 40.3 Fades/EcoFuturo FFP n/a 3.1 6.5 11.9 17.1 Idepro/EcoFuturo FFP 0.4 1.5 5.0 11.2 5.8 Sartawi ONG 0.6 1.1 2.6 5.0 4.4 ProMujer ONG n/a 0.1 2.3 3.5 5.6 Crecer ONG n/a 0.2 1.3 3.5 7.1

  11. MarketCoverage • Microfinance system has a larger client base than the traditional banking system • Microfinance institutions have reached 70% of their combined target of close to 600,000 borrowers. • Microfinance institutions are innovating, expanding their products, and reach towards the rural areas.

  12. Successful Portfolio Management • Intensive training for loan officers in accounting, credit risk, and microfinance techniques • Development of specialized products and services dedicated to microentrepreneurs • Integrated management information system (MIS)

  13. Market Penetration through New Products and Services • Market Expansion • Product Diversification: • Expansion in Geographic Reach: • Central credit information system • Information technology to expand market reach, lower cost and increase staff productivity

  14. Learnings from the Bolivian Experience • Astrong regulatory framework in support of microfinance is necessary to make the sector grow. • A state-sponsored credit bureaugreatly minimizes risk and cost of information search, and helps create market discipline. • MFIs can develop more diverse products to meet the needs of their clients and create a long-term and lasting relationship with them. • Technology plays a big role in service delivery. The Bolivian experience with ATMS and cash machines illustrates MFIs taking into consideration particular characteristics of the local population and geography and their adaptation of technology to be relevant to their market.

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