Global microscope on the microfinance business environment 2012

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Key changes and impacts since last year:
l Non-regulated MFIs have experienced high
growth rates in the last few years. This segment is
reaching a tipping point where some entities are
large, offer a variety of products and are competing
with regulated MFIs for clients.
l The May election was close, with Danilo Medina
of the Dominican Liberation Party winning with a
slim majority. His election is expected to ease the
passage of reforms, which may include more
defi nitions in the microfi nance sector.
l In March 2012, PROMIPYME, a government fi rsttier
lender, was accused of nepotism and corruption
when making loans to SMEs. It is unclear whether
the institution can move beyond these accusations.
To date, PROMIPYME has not affected the operations
of other MFIs in the market.
■ Ecuador
Key characteristics of the microfi nance business
environment:
l Ecuador’s microfi nance sector continues to go
through a transitional period as the Ley de la
Economia Popular y Solidaria (LEPS) is
implemented. The regulations are now in force,
although the new Superintendencia de la Economia
Popular y Solidaria has yet to be set up. The
publication of the regulations has provided some
guidance on how the LEPS will affect the sector,
but a prevailing mood of uncertainty still exists
over what its effect will be in practice.
l Credit bureaus remain well developed and
regulated, although Equifax now has a virtual
monopoly as a private provider. The Red Financiera
Rural holds annual events to highlight the risk of
over-indebtedness, while the Superintendencia de
Bancos also has programmes for fi nancial
education and client protection.
l Interest rates are capped for the entire fi nancial
sector in Ecuador. Under the current system, those
organisations that operate outside of formal
supervision have some scope for charging higher
interest rates. However, these will be subject to
more stringent regulation under the LEPS.
© The Economist Intelligence Unit Limited 2012
<strong>Global</strong> <strong>microscope</strong> on the microfi nance business environment 2012
Key changes and impacts since last year:
l Numerous small lending institutions currently
exist outside of the main Banking
Superintendency’s supervision. Under the LEPS, all
of these institutions will be brought under the
supervision of the new Superintendencia de la
Economia Popular y Solidaria.
l The LEPS sets out conditions for a minimum
number of members and a minimum capital base
for setting up co-operatives. The law also demands
that managers meet certain requirements in terms
of qualifi cations. These requirements are
considered high barriers and are expected to
prevent new co-operatives from forming.
l The LEPS will allow all co-operatives and credit
and savings unions to offer savings and time
deposits.
l Recent legislative changes complicate formation
into a regulated MFI. These legislative changes
demand greater capital requirements and a
minimum number of members before formation
into a regulated MFI.
■ El Salvador
Key characteristics of the microfi nance business
environment:
l Although there is no formal, legal defi nition of
microcredit or of a microcredit institution, this has
not been a major obstacle to the sector’s
development to date. The microfi nance sector
continues to comprise a wide variety of
institutions, including banks, regulated fi nance
companies and credit unions, non-regulated
fi nance companies, NGOs and co-operatives.
Microfi nance clients, which number over 500,000,
have access to different products and companies
without much concern over monopolistic practices.
l Supervision capacity exists, but its scope and
effectiveness are limited. Accounting practices at
regulated institutions that provide microfi nance
are fair and there have been improvements among
non-regulated entities, although further efforts are
needed.