While promising innovations in inclusive finance are occurring at the local level throughout Latin America, the facts still paint a vivid picture -- more needs to be done on a larger, more sustainable scale
Asunción, Paraguay (PRWEB) October 9, 2008
As part of the XI Inter-American Forum on Microenterprise, world leaders and financial experts, including Paraguayan President Fernando Lugo, Her Royal Highness Princess Máxima of the Netherlands, Inter-American Development Bank President Luis Alberto Moreno, and María Otero, President and CEO of ACCION International, are gathering this week in Asunción to highlight the critical role microfinance can play in economic development and poverty alleviation in the region. The forum will also address trends in new enterprise development, regulatory and legal policies, and innovative solutions and best practices to bring inclusive financial services to the poorest populations in Latin America, the Caribbean and around the world.
According to the a recent report by the Inter-American Development Bank, estimates for 2007 indicate that more than 600 institutions serving more than 8 million clients and are providing more than $8.6 billion USD in credit. While this number is noteworthy and Latin America has a deeper experience in microfinance than some other regions, it is estimated that only 10% of the potential demand for these services are being met in Latin America.
The U.N. Advisors Group on Inclusive Financial Sectors is taking a comprehensive view of microfinance in light of the recent economic crisis.
"It is very clear that microfinance is 'back to basics': the return of a traditional banking intermediary between savers and lenders," remarked HRH Princess Máxima, a member of the UN Advisors Group on Inclusive Financial Sectors (UNAG) during the inauguration of the XI Inter-American Forum on Microenterprise last night. "The return of a relationship between the client and their bank, the return to a realistic analysis of the amount of debt the client can take on. This is why the microfinance institutions have not been directly affected by the crisis."
"While promising innovations in inclusive finance are occurring at the local level throughout Latin America, the facts still paint a vivid picture -- more needs to be done on a larger, more sustainable scale," said HRH Princess Máxima, a member of the UN Advisors Group on Inclusive Financial Sectors (UNAG). "Governments of donor and developing nations alike must immediately step up their efforts to provide financial services to the poor. Governments must create policy and regulatory environments for inclusive financial sectors. The UNAG has identified several concrete steps that can be taken by governments and regulators, which will open up the financial sectors to everyone, thereby enabling families, businesses -- and ultimately entire nations -- to become more prosperous."
HRH Princess Máxima and María Otero are two of 25 Advisors who make up the UNAG, a group tasked by the United Nations with identifying key issues that limit access to financial services for the world's poor and with developing practical strategies to remove barriers to access. The group includes leading experts on microfinance from governments, central banks, regulatory agencies, microfinance institutions, the private sector, civil society, development agencies, donors and academia.
"A truly inclusive financial sector is the oxygen that fuels genuinely inclusive economic growth," said María Otero, President and CEO of ACCION International and also a member of the UNAG. "The field of microfinance is innovating rapidly and we are witnessing this in Latin America. In Latin America and elsewhere, we are moving beyond the simple era of microcredit and microloans toward a more comprehensive set of services. As the need grows, so does the response that is required -- we are now witnessing greater collaboration among microfinance institutions, the banking sector, private enterprise, regulators, development partners, governments and NGOs."
The UNAG's recommendations, which target governments, regulators, the private sector and development partners, underscore a clear message: cross-sector coordination is essential to creating successful inclusive financial systems and extending access to the largest number. They also note:
- Governments should promote access for all citizens to a broad range of financial products and services, embrace new technologies and delivery channels, create helpful policy environments, refrain from imposing interest rate ceilings that limit credit expansion, and promote consumer protection, transparent prices, financial education and an open, competitive market.
- Regulators should establish conditions that allow a diverse range of institutions to provide financial services, enable appropriate supervision for financial services providers and their supporting industries, and mitigate risk and balance concerns of safety without limiting access.
- Development partners should build human and institutional capacity to meet funding needs, support the range of financial institutions that are apart from inclusive financial sectors, and monitor the financial and social performance of development-partner investment portfolios.
- The private sector plays an important role in expanding access and should realize the market opportunities, engage at the executive level, and forge partnerships with both the financial sector and businesses that support the financial services industry.
The full text of the UNAG key messages as well as additional resources and information about the UNAG and microfinance are available at http://www.unadvisorsgroup.org.
This year's XI Inter-American Forum on Microenterprise, which was organized by the Inter-American Development Bank's Multilateral Investment Fund (MIF) and the Paraguayan government, is focusing on two main themes: 1) How to help more micro-entrepreneurs move into the mainstream economy; and 2) How microfinance institutions can practice "responsible finance," particularly in terms of lending. The forum this week is attended by more than 1,000 participants. In addition to exploring how to effectively reach more people with better, faster and more affordable inclusive financial services, forum participants are also discussing technology, rural finance, housing and microinsurance.
"Inclusive financial services are the building blocks of healthy economies," said Inter-American Development Bank President Luis Alberto Moreno, who hosted the forum this week. "These services provide dignity and opportunity to those who have been historically overlooked. When realized at scale, these services offer the promise to transform millions of lives for the better. Done right, this will be a win-win for everyone."
About the UN Advisors Group:
The UN Advisors Group on Inclusive Financial Sectors was established in 2006 and consists of 25 individuals representing Governments, central banks, regulatory agencies, microfinance institutions and other financial services providers, private sector financial institutions, civil society, development agencies and donors, and academia from all over the world. Its main role is to advise the United Nations system and member states on global issues relating to inclusive finance.
The objective of the Advisors Group is to increase sustainable access of poor and low-income households and micro and small entrepreneurs to a broad range of financial products and services through the development of inclusive financial sectors around the world.
The Advisors Group worked with Governments, regulatory and supervisory bodies, central banks, academia and the private sector to identify and define the key issues constraining access to financial services and advised the United Nations and its member states on strategies and concrete steps that can be taken to remove these constraints. The full text of the UNAG key messages as well as additional resources and information on the UNAG and microfinance are available at http://www.unadvisorsgroup.org.
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