Small Is Beautiful For Latin American Financing

While the global financial crisis is drying up traditional credit markets in the developed world, it is having the opposite effect on the microcredit sector, especially in Latin America. A recent survey of Latin American banks reveals that nearly eighty percent feel that the microcredit sector is strategically important to their business. This is because in times of financial hardship, banks can find security in diversifying their portfolios amongst the largest number of clients possible.

Latin America has some of the highest microloan penetration rates in the world. While the penetration rate in countries like Brazil and Argentina is only around 3% (meaning that only 3 of every 100 entrepreneurs that are eligible for microloans are actually receiving them), the rate in Peru, Paraguay and Chile is between 25 and 35 percent. It is believed that these numbers can be attributed to the strong community ties found within the Andean communities of Latin America.

An interesting article from the Financial Times highlights the growing microfinance sector in Latin American region.