Region

Latin America and the Caribbean

Credit facilities

Description

Microfinance extends microcredit and financial services to the estimated 2 billion working-age people at the BOP who are unbanked or who have no credit history.[1] Affordable credit opportunities offer low-risk microloans that can be combined with support from trusted loan advisors to enable the BOP to make informed financial decisions. Such programs make financial products and services more affordable for the BOP and help consumers build credit history. They can also empower BOP entrepreneurs, smallholder farmers, and producers by providing them with the financial services necessary to run a successful business.

Governments can encourage responsible microfinance programs and services by involving the private sector in the process of developing poverty reduction strategies, maintaining macroeconomic stability, and aligning the regulatory framework. The impact of these interventions will indeed depend on country-specific factors, such as market structure and maturity, governmental capacity, customer demand, and supervisory committees.  It is critical that the BOP’s financing needs are properly understood and that existing market penetration is effectively measured. Governments can leverage the existing network of regulatory agencies to expand coverage to low-income markets and to provide a more comprehensive assessment of the market and its risks. This can help policymakers avoid duplicative regulations and increase interoperability among market actors.

Policy Instruments: Countries: Topics: