1. Microfinances and Poverty Some reflections about the experience of Latin America Beatriz Marulanda “Financial Services for Low-Income Households” X Hemispheric Meeting of the Poverty and Social Protection Network Inter-American Development Bank Washington, Nov. 2008

2. Achievements of the Microfinance Industry in LA It proved that lending to (informal) microentrepreneurs was possible:  In a profitable way  With risk control It proved that focusing only on credit is a limited approach.(may be the less spread lesson learned)

3. Institutional Stages 70 ´s – 80´s 90´s > 2000´s NGO´s Upscaling from NGO´s to Microfinance Regulated entities Downscaling from commercial Banks Supply Products Microcredit Technical Assistance and Training Microcrédito Ahorros Microseguros Microcrédito Ahorros Microseguros Crédito de Consumo Transacciones New Segments Stablished Microentrepreneurs Low-Income workers

4. The “industry” consists of........ Type of institution N. of institutions Portfolio Clients Source : Navajas, Sergio, Microfinances in Latin America Latina and the Caribbean –Data Update –April, 2008

5. Challenges How to obtain greater levels of efficiency to lower costs  Technologies  Economies of scale How to render these services to the masses - scope  To microentrepreneurs ..as well as other segments of population (workers, households, students, etc). How to reach poorer segments of population, which most institutions do not serve.

6. POPULATION WITH ACCESS POPULATION WITHOUT ACCESS TO BANK SERVICES POPULATION WITHOUT ACCESS IN POVERTY OR EXTREME POVERTY LEVEL Target population Banks, CFC, Cooperatives Cooperatives and NGO’s ? Challenges

7. Attention to segments in poverty? From the supply  Microentreprise = Poors In the first an entrepreneurial activity is under way (min. 6 months). So, there is a repayment capacity Microcredit technologies are sustainable, some more than others, given a minimal level of operations, which does not seem close to poverty level segments

8. Attention to segments in poverty? From the Demand  We know that lower income segments use financial services (formal or informal): To make consumption easier As an instrument to protect themselves of their vulnerability. But also to facilitate asset building.  What are they ready to pay for them? Today they use expensive and risky informal instruments

9. How to relate it with Microfinances?  Conditional subsidy Programs. Saving Account But also credit?? Payers are mostly public banks, NOT microfinances  Is it necessary to think again about additional services as a precondition for access to financial services? Construction of social capital Training in productive activities Financial education  Can they be supplied in a profitable way? If not, who will pay for the cost of these activities? Attention to segments in poverty?

10. Reflections about public policy Who is leading the process?  Treasuries (Ministries of Hacienda) regulate financial activity  Social Ministries define Social Protection policy. Credit as well as saving are products that affect the health of the financial system. Therefore Social Ministries should document and uphold the importance of financial inclusion but this strategy should be defined by the Treasury (Ministerio de Hacienda).

11. How? EMPHASYZE SAVING vis a vis CREDIT  Sets limits in terms of entities PRODUCT REDESIGN  Adequate to lower income population’s needs (costs and processes)  Connected to a transparent information and in a responsible way CHANNEL REDESIGN  Facilitate transactions in non traditional channels  Reduce costs to banks as well as to clients Non Bank Agents Mobile Phones

12. Many thanks……….