For years Bolivia was a role model to follow for emerging microfinance marketsworldwide. A good enabling environment that promoted healthy competition, greater efficiencies within the microfinance industry resulted in a wider range of products at lower costs. The latter allowed the country achieving the financial inclusion of many who had previously been unserved by traditional commercial banks.
The Global Microscope on Financial Inclusion, the benchmarking index annually published by The Economist, ranked Bolivia for many years as one of the topperforming countries. In 2003, Bolivia was ranked as second outdone only byPeru. Yet in 2019, Bolivia had descended to the 18th position.
Going down in the ranking matters only because it denotes a deterioration ofthe enabling environment for financial inclusion in Bolivia. At the same time such deterioration hints that the lives of the most vulnerable have most likely been impacted negatively. Many blame such deterioration to the passing of a bill in 2013 that established mandatory interest rate ceilings, portfolio quotas,and other prescriptive rules.
Yet Bolivia is not the only country with such a regulation, policy makers in many countries have passed similar bills. Up till now, this type of regulation hurts rather than protects the most vulnerable by shrinking poor people’s access to financial services. Interest rate ceilings make it difficult, if not impossible, forformal or semi-formal financial institutions to cover their costs.
A recent study sponsored by Calmeadow, supported by ASOFIN and conductedby CIESMORI intitled “Client Desertion in Bolivia” sheds like on the impact Law393 has had in Bolivia. The study concluded that despite the spirit of the Law, it has contributed to the financial exclusion rather than the financial inclusion.The Law has translated into less credit to women, rural areas and less newclients. In the case of ASOFIN affiliates, they have not been able to grow evenat a vegetative pace.
The Bolivian microfinance industry characterized itself in the past for beingdynamic and innovative. Nowadays, it deems as focused on complying with regulation and securing its sustainability.
It deems clear that there is opportunity to grow in the Bolivian market, however, in order to be able to serve the financially excluded, adequate regulation and supervision is mandatory. Good regulation corrects market failures, Regulators should not rule on how and who to serve. The Bolivian microfinance industry continues to be strong and highly efficient and with the necessary adjustments to the regulation and supervision, the industry will be most likely recovering the dynamism lost over the last years. But to achieve the latter both sides need to start working together towards establishing afrank and constructive dialogue that will allow Bolivia to achieve a greater financial inclusion of its people.