Peru heads new global business climate index for microfinance

Peru has the world's best business conditions for microfinance, according to the results of the Microscope 2009 Index, published today by the Multilateral Investment Fund (FOMIN) of the Inter-American Development Bank, the Andean Development Corporation (CAF), the International Finance Corporation (IFC), and the Economist Intelligence Unit (EIU).

This is the second year running that Peru has headed the table as the best rated country by the Microscope. Until last year the index covered only 20 Latin American and Caribbean countries but this year the survey has been expanded to 55 countries around the world, and Peru's regional leadership has become global.

The best rated region in the report is Latin America, reflection of the vocation for microfinance which exists in various countries of the region. Bolivia took second place in the global index and another four Latin American countries were in the top ten (Ecuador, Nicaragua, Colombia and El Salvador).

Philippines, in third place, was the best rated country outside Latin America, followed closely by India in fourth place. The best rated African countries were Ghana, fifth, and Uganda, sixth.

The index will be presented at the Inter-American Microenterprise Forum (Foromic) to be held in the Peruvian city of Arequipa from September 30 to October 2.

Microscope was created in 2007 by EIU, the business information subsidiary of The Economist Group, with support from FOMIN and CAF. After two editions, IFC, with the support of the Dutch government, joined the initiative, which expanded the index into a global instrument.

"The expansion of Microscope opens a window on the ways countries innovate in microfinance, revealing the areas where improvements are needed," said EIU research manager Vanesa Sanchez. "By considering business practices and market development, as well as legal frameworks, the index can be a valuable tool for policymakers, industry professionals, donors and investors."

The index consists of an evaluation based on 13 indicators grouped into three categories: regulatory framework, climate for investment, and institutional development. Cambodia and the Philippines headed the regulatory framework table, while Chile came top in investment climate. Bolivia and Peru tied for first place in institutional development.

The countries were selected for the importance or development potential of their microfinance sectors. However, since the global index is based on previous studies from only Latin America and the Caribbean, this region is overrepresented with 21 countries out of 55. The index now includes 12 countries from Sub-Saharan Africa, seven from Eastern Europe and Central Asia, seven from East Asia, five from South Asia, and three from the Middle East and Africa.

"In the last two years, when the focus was on Latin America and the Caribbean, the Microscope catalyzed significant changes in microfinance policies," FOMIN general manager Julie T. Katzman said, "this is a tool which helps decision-making by offering updated and complete information which compares policies and actions between countries."

Microscope 2009 is being presented at "the ideal time for taking sound decisions," CAF deputy director for promotion of micro-, small- and medium-sized enterprises, Alejandro Soriano said. "This report will be a reference guide for keeping abreast of changes in the industry, facilitating the sharing and dissemination of innovations around the world."

The IFC manager for advisory services on access to finance, Peer Stein, said, "the expanded scope of the new report gives us a better understanding of where microfinance is taking off and what makes that possible. To build more inclusive financial systems for the benefit of all, it is essential to improve the regulatory and institutional environments for microfinance in emerging markets."

Global Microscope (.pdf)

Global Microscope on Microfinance (.xls)