Among Latin American countries, Guatemala has the highest percentage of population living in poverty, followed by Bolivia. Nearly 40% of its 10.8 million inhabitants live in urban areas, making it one of Latin America’s least urbanized nations. In 1998, the largest metropolitan area by far was Guatemala City, with 2.4 million inhabitants. About 50% of the urban population and less than 30% of the rural population, have access to infrastructure in the country and only about one-third of the adult inhabitants are employed in the formal sector. The national illiteracy rate, 44%, is among the region’s highest, with the majority of the illiterate living in rural areas.

Microfinance

In spite of important development strides during the post-conflict era, per capita income and growth rates remain very low for more than half of the 11 million of Guatemalans. Moreover, most of these people rely on micro-businesses for their livelihoods. Guatemala’s microenterprise sector is one of the largest among Central American countries. Women's participation in the informal sector has been estimated from 35 % (SIMME—Sistema Multiplicador de la Microempresa) to 55 % (USAID). Most of the informal workers are involved in trade, with a 36% share, followed by agriculture at 24%, manufacturing at 23%, with the remaining share concentrated in services.

All these factors led UNCDF to invest in the microfinance sector in this Central American country. The Special Unit of Microfinance, through its MicroStart programme, has been working to strengthen the microfinance industry in Guatemala since 2001. In collaboration with donors and practitioners, the MicroStart Guatemala project was initiated as a part of a global MicroStart pilot programme to enhance the access of poor micro entrepreneurs to financial services in order to expand their businesses, increase their income, and augment employment. MicroStart is achieving its aim through (1) building the capacity of five local organizations to provide microfinance services to economically active poor clients on an operationally sustainable basis; (2) building the capacity of a local technical service provider to provide ongoing technical assistance and developing the structures to support these local organizations over the long term; and (3) contributing to local and global knowledge of the impact of microfinance on clients and how to build the capacity of young organizations.

As the International Technical Service Provider (ITSP) for the programme, Prodem has been offering technical assistance to two regulated financial institutions, Banco del Café and Banrural since the inception of the project. So far, Prodem has been able to increase the capability of Banco del Café and Banrural to provide a broad range of sustainable banking services to rural low-income households. More importantly, the successful performances of these two institutions have encouraged other finance service providers in Guatemala to establish financially sustainable businesses. As a result, more than 20,000 low-income entrepreneurs are now accessing the financial sector in the country.