Bolivia during the global crisis 1998-2004: towards a 'macroeconomics of microfinance'
The macroeconomic role of microfinance appears to have varied enormously between country cases, as notably exposed by the recent wave of macroeconomic crises. For example, in Indonesia in the late 1990s microfinance appears to have played a notably counter-cyclical role, whereas in Bolivia, the main focus of this paper, its role was in most cases to intensify rather than restrain the crisis. We find part of the explanation for this in the behaviour of government towards microfinance (much more conciliatory towards defaulting debtors in the Bolivian case) and in the structure of demand (unfavourable, in Bolivia, to the distribution and service sector which is the main market for microenterprise). However, closer examination of the Bolivian case suggests that institutional design also played an important role. In particular, those organizations which provided savings, training and quasi-insurance services bucked the trend of rising default rates and falling lending through the crisis and did particularly well, whereas the new breed of consumer-credit microfinance organizations did particularly badly and in several cases went out of business. This experience suggests, in particular, that it may be appropriate to call into question the fashionable 'minimalist' (credit-only) model of microfinance, as certainly in Bolivia it was principally the credit-plus institutions which proved more financially disciplined and more resilient to crisis. Copyright © 2006 John Wiley & Sons, Ltd.
Volume (Year): 18 (2006)
Issue (Month): 2 ()
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- Daniel Hardy & Paul Holden & Vassili Prokopenko, 2003.
"Microfinance institutions and public policy,"
Journal of Economic Policy Reform,
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- International Monetary Fund, 2002. "Microfinance Institutions and Public Policy," IMF Working Papers 02/159, International Monetary Fund.
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- P. Mosley, 2001. "Microfinance and Poverty in Bolivia," Journal of Development Studies, Taylor & Francis Journals, vol. 37(4), pages 101-132. Full references (including those not matched with items on IDEAS)
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