The Impact of Microfinance Loans on the Clients' Enterprises: Evidence from Cajo Los Andes, Bolivia

This paper analyzes the impact of microfinance loans on productivity and growth of enterprises of clients, in Bolivia. The paper informs:

• Prevalence of the informal sector in South America countries;
• An estimated 57% of the labor force in the informal sector in La Paz, Bolivia;
• Low level of formal banking and capital availability to microenterprise sector;
• High transaction costs for formal sector loan, at 20%-30% of loan size;

The paper specifically analyzes the impact of microloans from a Bolivian microlender, Caja Los Andes, on the enterprises of clients and finds:

• One-third to one-fourth of all Bolivian microenterprises are estimated to be active borrowers;
• Larger businesses tend to benefit more from microfinance loans;
• Influence of prior loans is positive and significant on growth in assets and sales revenue;
• Loans raise productivity and growth for most clients;
• Correlation between loan approval and growth and productivity is positive;
• Correlation between the existence of second balance observations and growth and productivity is negative.

In conclusion, the author suggests two further areas of research:

• Examining the merits of supporting microenterprises in comparison to larger and potentially more efficient enterprises;
• Extending the impact analysis from the perspective of the micro entrepreneur to a general equilibrium framework where market-wide changes are considered.