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Insurance and Credit Markets: Expanding Financial Access in Latin America

April 28, 2008


  • Robert A. Annibale, Global Director of Microfinance, Citigroup (Keynote Speaker)
  • Rocío Cavazos, Chief Financial Officer, Pro Mujer
  • Andrea Esposito, Managing Director, Standard and Poor’s
  • José W. Fernández, Partner and Global Co-Chair, Latin American Practice, Latham & Watkins LLP (Moderator)


AS/COA’s second microfinance roundtable discussion provided an opportunity to discuss challenges and opportunities for microfinance in expanding its outreach in Latin America. The sector has favored a commercial approach to capitalize and scale up, as Latin American microfinance moves beyond the distribution of loans to include products such as insurance and savings. Examples include Banco Solidario in Ecuador, BancoSol in Bolivia, and Compartamos in Mexico. Speakers agreed that transparency, efficiency, profitability, credit ratings, and an integrated services model serve help ensure the growth and sustainability of the microfinance sector.

Transparency and Efficiency

In his opening remarks, Robert Annibale highlighted the importance of transparency and efficiency in a sector constituted by a wide range of institutions with varied agendas and ownership. A decade ago, microfinance was primarily composed of NGOs delivering credit. Today, driven by the ability to provide loans, microfinance institutions (MFIs) range from NGOs to cooperatives to cajas to commercial banks offering full service portfolios. In Latin America, the most profitable region for microfinance according to Annibale, this transformation has increased operational efficiency and commercial funding in MFIs, which are now seen as reliable and profitable organizations in which to invest. The sector has witnessed a growth in tools that offer beneficiaries access to products and services, thereby allowing a better understanding of the markets and its participants. The MIX Market and the Standard & Poor’s microfinance credit ratings methodology serve as examples of these initiatives.

Ratings and Interest Rates

The microfinance sector boasts enormous potential, not only in terms of its social agenda but also in accessing capital markets, speakers agreed. Standard & Poor’s Andrea Esposito noted that the microfinance market—currently estimated to have a value of $30 billion—has a potential worth of $300 billion. S&P’s ratings come at a time of extreme significance for the sector, when it must tap into mainstream capital markets to grow. Investors can now understand their risks and rewards through globally accepted standards for credit analysis.

Interest rates served as a source of concern for members of the panel’s audience. Although microfinance has proven to be a profitable business for institutions, high interest rates throughout the region undermine the social and ethical foundations of the sector. Only Bolivia, which has a very competitive microfinance market, offers low interest rates to beneficiaries and still experienced a positive return on equity and assets. Yet interest rates not only depend on how saturated a particular market is, but also on the regulatory frameworks of the country.

Integrated Services Model

Increased transactions costs serve as one of the biggest challenges for MFIs offering integrated services such as healthcare, insurance, savings, training, business development, and credit. Rocío Cavazos described how Pro Mujer’s approach has not only been effective because it offers these services, but also by providing multiple services during one visit and thereby reducing transaction costs to clients. When offering integrated services, delinquency rates diminish and MFIs can benefit from improved portfolio quality. Pro Mujer, for example, receives timely repayment of 99 percent of its loans.