Paper
The Uneven Development of Microfinance: A Latin-American Perspective
What factors have contributed to uneven development of microfinance in Latin America?
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28 pages
This paper presents a set of variables that explain the differences in the uneven development of the microfinance sector of Latin America. It applies a cross-country regression by using a unique dataset on the outreach of microfinance institutions (MFIs) in the year 2001. The paper finds that:
- Microfinance is more prevalent in countries that have received a higher proportion of international support;
- MFIs reach more number of clients in high inflation areas;
- Human capital and population density play an important role in the growth of MFIs;
- Less industrialized countries have bigger microfinance markets;
- Financial sector liberalization has a positive influence on the presence of microfinance;
- Regulatory environment does not play a significant in the development of microfinance sector.
The paper concludes that further research is needed for analyzing:
- The average loan size as a dependent variable to understand the depth of outreach of microfinance sector in a country;
- Emergence of microfinance and development processes using panel data;
- Role of informal players.
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