On October 5th, 2005, in the framework of the celebration of the VIII Inter-American Forum on Microenterprise, the Secretariat of the International Year of Microcredit and the Andean Development Corporation hosted an event to highlight the Latin American perspective and results of the International Year of Microcredit: "Expanding the Frontier of Microfinance in Latin America". The event was sponsored by the Foundation CajaGRANADA of Spain
The meeting brought together the Year's National Committees from the Latin American region as well as a range of actors involved in microfinance. The meeting provided a platform to a) share the results of the Year, b) exchange the ideas and experiences of the National Committees, and c) build a vision for the future. The focus of the meeting was to examine the innovations and successes of microfinance initiatives and the impact of microfinance as a means to provide sustainable solutions to economic development problems. The barriers faced in building inclusive financial sectors in Latin America were also analyzed. Emma Torres, Senior Advisor to the International Year of Microcredit, said: "The IADB Forum focuses the critical issues for the Latin American region. Within this context, the International Year of Microcredit has been extremely well received. We are thrilled that this mature market has embraced the Year and formed so many National Committees. Given what we are seeing here today, we are confident that the initiatives founded under the Year's auspices will move forward in the region".
The conference was divided into four panels, and the following conclusions were reached:
Panel 1: Building Inclusive Financial Sectors to Achieve the Millennium Development Goals (MDGs)
The objective of this panel was to understand the major constraints and implications in developing inclusive financial sectors in the region. To achieve this objective, the participants analyzed the principles and obstacles that prohibit access to financial services for the most excluded sectors of the population. In the same way, panelists focused on the importance of the Year's Blue Book Project due to its purpose of defining, explaining and promoting the concept of inclusive financial sectors. The Blue Book project intends to reach out to those entities responsible for establishing regulatory and development policies.
The participants identified six key themes to promote and develop inclusive financial sectors in the Latin American region: demand, supply, financial infrastructure, regulation and support from local economies and international entities.
Finally, the participants concluded that a great effort needs to be made to compile data, as established by the Year's Data Project. This project is directed to governments, regulatory entities and development organizations, as well as to microfinance institutions in order to obtain a clear understanding of the current market, and creating a basis for future direction and service improvements.
Panel 2: Overcoming Constraints and Building Commitment
The objective of this panel was to understand the major constraints and implications from a regulatory perspective, of developing inclusive financial sectors in the region. The underlying concept of this panel was that, in order for microfinance to be an effective tool to alleviate poverty, countries must succeed in fostering a policy environment conducive of entrepreneurial activities and ensuring the appropriate role of government for the development of inclusive financial sectors.
The panel's main conclusion was that there is a need to establish a clear, sector specific legal framework which promotes adequate supervision of the microfinance industry. This requires a detailed understanding of the industry in order to form the proper regulations and ensure that they are applied to the proper institutions. The importance of gradually developing this regulatory framework was also highlighted, in order to allow norms to evolve along with the industry and related technological innovations. The panel concluded that the government must play the role of regulatory agency and not that of a service provider in order to provide adequate accountability and efficiencies.
Panel 3: Social and Economic Development through Rural Microfinance
The objective of this panel was to analyze the relevance of promoting microfinance in the rural sector and the challenges of attaining its success. This implies measuring the performance and impact of rural microfinance in order to determine the strength of microfinance as an instrument for social integration and economic development.
It was concluded that there are a significant number of informal financial services are accessible in rural areas, although not much information is available about the existence of formal services. There are some cases such as FFP Prodem and Financiera Rural, which have evidenced that rural area integration is possible through massive resource mobilization, which includes access to financial services and other services such as training and consultancy.
Technological innovation in the microfinance sector allows the capacity to support geographically dispersed clients in a profitable manner, generating new paradigms in the industry, which allow for higher social impact.
The principal challenges for rural microfinance development include the creation of a Rural Investment Law, the monetization of rural assets, the feasibility of proprietary law, the creation of a micro-stock exchange, and establishing the right environment for competitiveness and market development.
Panel 4: Institutional Integration and Environmental Considerations
The objective of this panel was to understand the benefits of institutional integration in the region and the impact microfinance institutions can have in environmental protection.
It was concluded that the regional and international integration is essential for the activities of some groups. Integration has contributed to the increase in product availability and service bases for entrepreneurs, with these experiences adapted and transferred among the different counties and regions. At the same time, the standardization of environmental norms and rules of conduct have been achieved.
Integration has also been piloted among job providers, allowing for the transfer of employees among diverse countries. On the other hand, the financial institutions must remain vigilante against activities that could have negative effects in the environment and they must promote the enforcement of environmental law in force.
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