Microfinance sector advised to work on transparency
“The Latin American and Caribbean microfinance industry…will have to work hard to ensure transparency in its operations and its clients’ welfare,” Inter-American Development Bank President Luis Alberto Moreno said today at Foromic 2010. MFTransparency spoke on the high profile panel on Consumer Protection and Responsible Finance that followed.
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Microfinance sector advised to work on transparency, MONTEVIDEO, Uruguay, Thursday October 7, 2010
The Latin American and Caribbean microfinance industry, which continued growing despite the global economic crisis, will have to work hard to ensure transparency in its operations and its clients’ welfare, Inter-American Development Bank President Luis Alberto Moreno said today.
Moreno and Uruguayan President Jose Alberto Mujica opened the 13th Inter-American Forum on Microenterprise (Foromic 2010), which is taking place until Friday.
According to the Multilateral Investment Fund (MIF), the IDB affiliate specialized in microenterprise, at the end of last year there were some 700 microfinance institutions in this region, serving nearly 10.5 million clients and with a loan portfolio totaling US$12.3 billion. At the end of 2008, when the crisis was underway, this industry had 9.4 million clients and US$10.9 billion in microloans outstanding.
In his speech to the participants of Foromic, the leading annual conference on microenterprise in Latin America and the Caribbean, Moreno said that the microfinance industry is entering a phase of consolidation and specialization.
“In this new stage – and this is one of the lessons from the recent crisis – there will be growing concern over consumers’ welfare. Therefore it’s crucial for the industry to start anticipating their needs and to work hard to increase transparency and offer greater protection to its clients, as well as to take steps towards measuring the social performance of microfinance. At the IDB we’re proud to support such efforts,” Moreno said.
In welcoming the event’s participants, Mujica highlighted the role microfinance plays in countering abusive lending practices. The Uruguayan president said microcredit contributes to social equity and can be a “tool for liberation” for the poor.
Social performance is the central topic of Foromic 2010, which brought together more than 1,400 delegates from microfinance institutions, credit unions, banks, investment funds, regulating agencies and national and international organizations. Measuring the social impact of microfinance will complement the more traditional financial performance indicators used by the industry.
The microfinance industry has yet to overcome the challenge of reaching more businesses and households. According to the MIF, nearly 60 million microentrepreneurs in Latin America and the Caribbean lack access to formal credit and other basic financial services.