Global Microscope 2013: Continued Growth and Innovation in Financial Markets for Low-income Populations

Latin America and Caribbean countries register five of top ten overall scores for microfinance environments

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The Latin American and Caribbean region continues to perform well in the 2013 edition of the Global Microscope, a comprehensive report on the world’s microfinance business environment produced annually by the Economist Intelligence Unit (EIU), with support from the Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank (IDB) Group. As they did in 2012, Peru and Bolivia held the top two spots among the 55 countries worldwide. Colombia (6), El Salvador (8) and the Dominican Republic (10) joined them in the report’s top 10. Peru has held the Microscope’s number one position for six consecutive years.

According to the 2013 Microscope, the microfinance business environment has improved globally in the past year. More countries improved their scores than worsened: of the 55 countries included in the 2013 index, 30 improved their overall scores, 19 declined, and 6 were unchanged. The study assesses countries across three major categories: regulatory framework and practices, supporting institutional framework, and political stability. As in previous years, the EIU completed interviews and conducted an online survey to incorporate the views of an expanded community of microfinance specialists. The EIU consulted microfinance institutions, networks, regulators, consultants, and investors to gather insights from all relevant stakeholders.

The 2013 Microscope includes an “In Focus” section that explores the broadening scope of financial services offered by microfinance institutions. “Financial inclusion is no longer led by a few specialized institutions and products,” said Senior MIF Specialist Sergio Navajas. “New business models and services, technological advances, and better regulatory environments are changing the landscape for financial markets. This is a trend we are seeing in our region, where innovation is impressive, yet prudent.”

Highlights in this year’s report related to Latin America and the Caribbean include:

• Governments in several countries, including the Dominican Republic, Nicaragua, Panama and Uruguay, improved regulation of financial agents, creating opportunities for further innovation in correspondent and mobile banking, but implementation of these new services is still at the pilot stage.
• The Dominican Republic rose into the global top ten, due to improvements in pricing transparency, financial transactions through agents, and regulatory capacity in the country.
• New regulations in client protection increased pricing transparency in El Salvador and enhanced consumer rights in dispute resolution in Honduras. As a whole, the LAC region ranks third on transparent pricing.
• A number of the region’s countries implemented regulatory changes during the past year, with potential implications for the microfinance operating environment. In Nicaragua, for example, a new specialized supervisory entity seeks to improve standards for microfinance without imposing interest rate caps. In Ecuador, there is also a new supervisory entity with a broader mandate that seeks to oversee all institutions working with low-income populations.
• The region leads globally on dispute resolution; all countries in the region have a dispute-resolution mechanism, although the resources assigned to these mechanisms vary by country. For example, Peruvian institutions must publish client dispute statistics online, while both Brazil and Trinidad and Tobago use ombudsmen in the regulated financial sector to help resolve disputes.

The Global Microscope 2013 issupported by the MIF the Andean Development Corporation; the Center for Financial Inclusion at Accion; and Citi Microfinance.