Cautious Resilience

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Cautious Resilience: The Impact of the Global Financial Crisis on Latin American and Caribbean Microfinance Institutions

The international financial crisis was quick to affect the financial markets of the LAC region. Yet, by the end of 2008, most countries had not yet seen an impact on the populations microfinance institutions (MFIs) serve. With some exceptions, such as countries that were already struggling with economic difficulties (Nicaragua and Ecuador), the slowdown in the real economy has taken longer to be felt. Nonetheless, MFIs felt the effects through tightening credit markets, both domestically and internationally.

The purpose of this study is to gauge the impact of the global financial crisis on the microfinance sector in Latin America and the Caribbean (LAC). A situation which was still evolving as this paper was written. For example, in October 2008, when interviews with microfinance institutions (MFIs) first began, a majority of responses reflected that growth had slowed somewhat, but not dramatically. Nonetheless, preliminary data showed that by the end of 2008, portfolio growth had indeed slowed dramatically. By early 2009, it became apparent that the crisis was having a more profound impact than those directly involved realized only a few months prior.

This study attempts to describe the situation as it evolved during the last quarter of 2008. It is not intended to be a comprehensive or methodical survey of the entire microfinance sector. Rather, it combines a number of interviews with leaders of MFIs and microfinance investment vehicles (MIVs) with MicroRate’s own observations gathered during many ratings of MFIs during the fourth quarter of 2008.

Written by: Sebastian von Stauffenberg, Damian von Stauffenberg, Stephen Brown, Maria Belen Effio. March 2009.