Microfinance as a mainstay of financial inclusion in Bolivia

Freddy Puente

Ejecutivo de la Dirección de Sector Productivo y Financiero Región Sur

This article was written by Freddy Puente and Heidi Szeinfeld

To reverse this situation, CAF is advancing implementation and measurement of results of credit lines for these types of customers who require instruments tailored to their needs. In Bolivia, for example, we are working with Crecer IFD, Pro Mujer IFD and Banco FIE to promote financial inclusion and the development of microfinance in the country.

These microfinance entities were originally conceived with the aim of improving the quality of life of Bolivia’s most vulnerable sectors in rural and peri-urban areas, providing access to the financial system. After a 30-year successful, self-sustaining experience, they are still pursuing the same goals. Crecer IFD and Pro Mujer IFD have a 47% market share in microfinance entities, which are grouped in the FINRURAL association. In addition, Banco FIE holds a 7% market share of Bolivia’s banking.

These institutions aim to improve the operational results of small producers and micro-entrepreneurs, hence CAF’s significant support in achieving the following results:

     *approximate figures

In addition to the results, this support helps design ongoing financing products and programs, aimed at specifically addressing the needs of these institutions and their customers. We are therefore currently designing the Digital Transformation Program for Microfinance Institutions, which seeks to strengthen the capabilities of these CAF clients, in the areas of digitization of processes, products and services. At the same design stage, we are developing the Credit Product for Education and the Gender Equality Program. We are therefore securing a strategic position to provide comprehensive and differentiating support more consistent with our role as a development bank.

Below is a brief description of each institution and the different services they offer:

Crecer IFD

It is a Financial Development Institution devoted to providing financial and development services mostly to low-income women. Around 77% of its customers are women and a significant percentage of its branches are located in rural areas (31%), with the rest (69%) in peri-urban and urban areas. It also offers financial credit solutions for education, business, production, health, housing and other purposes.

Fundacion Pro Mujer IFD

Pro Mujer IFD aims to empower low-income women to reach their full potential by providing financial services with a holistic approach that includes social management. Around 83% of its customers are women and 10% of their branches are located in rural areas, with the rest (90%) in peri-urban and urban areas. The institution offers financial literacy services, online training, environmental training, gender-based violence prevention awareness, healthcare services (through institutional agreements) and first-class job placement programs. It therefore contributes to the comprehensive development of its customers and their families.

Banco FIE

Banco de Fomento a Iniciativas Económicas (Economic Initiatives Promotion Bank), is a multipurpose bank with a presence in both urban and rural areas. It prioritizes the most vulnerable sectors of the Bolivian population, excluded from the traditional financial system, while financing production chains to meet the needs of the Bolivian population and creating sources of employment that energize the economy. Currently, Banco FIE is the third largest institution in the Bolivian financial system in terms of coverage, with a network of 150 agencies and branches, of which 71 are located in rural and peri-urban areas. Its credit portfolio targets primarily the micro and small business segments.

Lastly, it is important to highlight the main credit technology used by the microfinance organizations Crecer IFD and Pro Mujer IFD, namely Communal Banking. It is based on a joint guarantee system that allows savings and is complemented by literacy modules. This technology targets women in conditions of social and economic exclusion, who form groups of 8 to 30 people, who manage the credit system and guarantee loans for each other. It promotes savings and provides access to healthcare and training services, as well as free rebate insurance that protects the family in the event of total disability or death of the member.

The results demonstrate not only CAF’s interest in this niche market, but also the scope of these facilities for micro-entrepreneurs and their families. Maintaining support in such specialized institutions in the microfinance niche is a useful approach to reach Bolivia’s vulnerable groups.