1. The Impact of the Global Crises on the Microfinance Sector in Latin America. A Threat for Client Outreach or an Opportunity for Improved Social Performance and Impact? Reynaldo Marconi FORO LAC FR “ Global Governance, The Crisis and Development” Workshop: Microfinance at Risk?

2. Questions 1) Crisis:  ¿a threat for poor and vulnerable client outreach or,  an opportunity to improve social performance and impact? 2) ¿What should be done in environment of crisis:  live with and overcome the moment of crisis, or,  convert the crisis in an opportunity and how?

3. Regional Context  The Latinoamerican drama es the reproduction and persistence of rural poverty.  Poverty in LAC passed from 45.7% in 1994 to 34.1% in 2007, and extreme poverty, from 20.8% to 12.6%.  Poverty and rural indigency levels still high: 52.1% and 28.1%  Note: even if there are no updated data on poverty levels, the food crisis increased the number of people with hunger in LAC from 45 mln in 2008 to 53 mln in 2009

4. Effects of the crisis in the region  Impact through 4 mechanisms: a) Lower income as a consequence of reduced labor opportunities b) Lower income because of less remittances from migrants c) Reduction of public expenditure, in particular social expenditure d) Decrease of export income, because of reducion of consumption and imports in Northern markets  The rural area and vulnerable groups will be the most affected;  Need to induce policies to support smallscale agriculture and subsistence agriculture in order to revive the sector, in the framework of food security and sovereignity policies

5. ¿Where is microfinance in LAC today? DetailMFIs VCMFIs MSCFE / PFE Legal FormPrivate CompanyCivil Associations and Foundations Private companies; Associat. & Found.; Cooperatives PurposeFor profitNon-profitVarious Focus Regulation Microfinance as a business Regulated Outreach to poor and vulnerable Non-regulated (with exceptions) Autonomous development clients Regulated and Non- regulated MarketUsuryPeri-urban and rural Rural Main clientsTrade & services microentreprise Women Peasants and Agricult. Producers Products and Services Microcredit, savings, SAF Microcredit and Village Banking Investment Finance; SAF

6. Access to financial services in LAC Average in the region; 36% (World bank) <10%10 - 20% 20 - 30%30 - 40% 40 - 50% 50 - 60% 60 – 70% NicaraguaHaitíHonduras Costa Rica Guyana R. Dominicana Venezuela Argentina Surinam Guatemala Ecuador Paraguay Bolivia Panamá Belice San Vicente Brasil Uruguay Colombia Barbados Bahamas Trinidad Jamaica Chile But the rural world is invisible !! For example Brasil, it is a country considered with medium coverage, but the rural poor still have few access to financial services, the inclusion is an urban phenomenon

7. 160 millon of poor in the world have access to Microcredit (Bill & Belinda Gates Fundation, 2008) South AsiaAsia Pacific Subsaharian Africa Latin America MENAEECA 20%5%3%5%2%10% % Percentage of poor active population with access to services How much rural? Profile of Microfinance in LAC IADB: 600 institution in 25 countries, over 8 millon clients, Credit portfolio USD 8.6 billon, 70% of volume and over 50% of clients are attended by regulated institutions Poor in LAC 190 mln (IADB,2008) 120 mln (WB) 240 mln (FAO)

8. Effect of the crisis in the operators DETAILMFIs VCMFIs MSCFE/PFE Marketing strategyUpgradingExpansionExpansion and Penetration Portfolio .. .. .. Clients .. .. .. Deposits .. .. .. Innovation .. .. .. Financial Return .. .. .. Equity .. .. .. Efficiency (operating costs/portfolio) .. .. ..

9. Volviendo a las interrogantes Amenaza u oportunidad? DETAILMFIs VCMFIs MSCFE/PFE Threat to reduce or decline outreach to poor and vulnerable clients Indifference. Because of cautious policies and financial prudence, these limit their coverage and growth  there is a real threat Coverage is invariable and constant  there is no threat Opportunity to focus and deepen coverage Upgrading strategies These are subject to own and funding restrictions (less loan funding or more cautious apex funds) Opportunity to focus on policies prone to food security and sovereignity

10. Back to the questions Threat or opportunity?  The crisis is not a threat to reduce or decline the outreach to poor and vulnerable clients, but an opportunity to focus and deepen coverage of microfinance services, adopting renewed approaches;  The coverage is a necessary but insufficient condition. Positive and impacting changes should be promoted in order to enable clients to depart from poverty;  For this, it is imperative to promote the management, monitoring and measurement of social performance in microfinance.

11. ¿What should be done from the microfinance sector? Focus on strengthening ot financial entities of the poor and vulnerable themselves, for example agricultural producers. Work on the organization and functioning of a Certification System of Social Performance to differentiate the role of MFIs and privilege the support those with major impact on real poverty reduction.

12. MUCHAS GRACIAS THANKS