Global microscope on the microfinance business environment 2012

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Georgia and Azerbaijan as these countries focused
their increasingly limited resources on the formal
fi nancial sector and larger institutions. Credit
bureau scores increased in BiH and Azerbaijan,
owing to increasing political pressure to avoid nonperforming
loan (NPL) crises and a general focus
on increasing usage of credit bureaus put in place
in previous years. Eastern Europe and Central Asia,
along with the Middle East and North Africa, are
the only two regions with limited development of
fi nancial transactions innovations such as mobilephone
payments and point of sale (POS) terminals.
Most countries in the region scored 0 out of 4
score, resulting from regulatory barriers, low
uptake, and a focus on mobile banking for existing
(commercially) banked clients rather than
microfi nance clients. Only Armenia and Azerbaijan
are making notable advances in this area.
Latin America and
the Caribbean
The Microscope study began with the examination
of Latin America and the Caribbean six years ago.
Today, Latin America still remains the best
represented region in the study with 21 of the total
55 countries. Latin America has also continually
performed the best among all regions included in
this study. Indeed, nine of the Latin American
countries improved their overall score. Scores in
the Supporting Institutional Framework, in
particular, remain higher than scores in the
Regulatory Framework and Practices, which only
slightly increased over the year. Despite
experiencing slightly increased political meddling
in the microfi nance sector, Latin America still ranks
fi rst in this category.
Of the 55 countries, Peru takes the number one
spot and Bolivia takes number two. Peru is notably
the only country in Latin America to achieve the
highest score of 4 for its regulation of microcredit
portfolios and overall capacity to supervise
microfi nance. Chile, as well, jumps three places to
13th. While Chile’s regulatory environment does
not specifi cally address agent banking, agent
transactions have evolved from a pilot stage over
© The Economist Intelligence Unit Limited 2012
<strong>Global</strong> <strong>microscope</strong> on the microfi nance business environment 2012
the past year, thus increasing Chile’s overall score.
At the other end of the scale, both Venezuela and
Trinidad and Tobago fell one spot to 53rd and 54th
respectively. Ecuador also dropped three places to
11th owing to recent legislative changes that
complicate formation into a regulated microfi nance
institution (MFI). These legislative changes
demand greater capital requirements and a
minimum number of members before formation
into a regulated MFI.
Bolivia, Peru and Chile all improved their
regulatory frameworks for deposit-taking through
the presence of reasonably prudent regulation.
There were also many score increases in the
Supporting Institutional Framework, despite the
absence of effective credit bureaus in Haiti and
Venezuela and minimal agent mechanisms in
Argentina and Trinidad and Tobago. The most
progress was made in credit bureau coverage;
Bolivia and Peru have become pioneers in the
region for providing reliable and comprehensive
borrower information. Despite generally
performing well across all indicators, there have
been some hurdles to the formation of regulated
MFIs in Latin America. Ecuador and El Salvador, for
example, recorded declining scores in this area
owing to relatively high capital requirements,
among other constraints.
Finally, a number of regulatory changes have
been noted in the region, although the lack of
implementation has precluded score changes.
Brazil, for example, passed a registry bill for
positive credit information services in 2011.
Nicaragua also passed a microfi nance law in 2011
that establishes the National Commission for
Microfi nance as an industry oversight body, defi nes
microfi nance, allows interest rates to be set freely,
and establishes consumer protection law, among
other developments. Lastly, Chile established a
new government consumer protection agency,
SERNAC Financiero, in 2011 to provide increased
consumer protection in the regulated fi nancial
sector. However, the full effects of these changes
are not yet visible.