LatinFinance - November/December 2016 - 34

Central Bank says two of the most important industrial sectors for micro-entrepreneurs are the retail trade and the consumer
sector.
Fundación Paraguaya, an NGO dedicated
to microfinance, estimates Paraguay's
microcredit portfolio totals $1.5 billion.
The Paraguayan Central Bank supervises
17 banks and nine other financial institutions, all of which provide microcredit. The
two most important microfinance institutions in the country are Visión Banco and
Banco Interfisa.
Visión was set up in 1992 and has the goal
of reaching 1 million clients by 2017, across
microfinance and traditional lending. Es-

NÉSTOR CASTRO, BOLIVIAN
ASSOCIATION OF DEVELOPMENT
FINANCE INSTITUTIONS

"BOLIVIA WOULD BE
A VERY DIFFERENT
COUNTRY IF THE
MICROFINANCE
INDUSTRY DID NOT
EXIST"

The unbanked
Banking penetration in Paraguay
10%

Paraguayans without a
formal account
Paraguayans with an
account at a cooperative

17%

Paraguayans with an
account at a bank
Paraguayans with an
account at a bank and a
coop
71%

Source: Paraguayan National Financial Inclusion Strategy 2014-2018

tablished in 1978, Banco Interfisa today has
around 100,000 clients.
The government's 2013 national financial
inclusion survey indicates that 55% of adults
use some sort of formal or commercial
financial product to manage their day-today finances.
The figure is largely driven by the strong
presence of cooperatives and mobile money
providers in Paraguay, which together
reach 40% of the population. The country's
Cencopan network is made up of around 50
financial cooperatives and it reaches almost
one quarter of the national population.
Micro, small, and medium-size enterprises (MSMEs) represent around 15% of the
economically active population, according
to the Central Bank. It is estimated that up to
80% of the country's companies are microenterprises.
"Microcredit enables MSMEs and small

34 L ATINFINA NCE.COM - November/December 2016

farmers to access formal financial services,"
says Hernán Colmán, Paraguay's banking
superintendent. "It offers opportunities
for the growth in the production of these
sectors, which are important generators of
employment."
He says the superintendency, which
is part of the Central Bank, is working on
measures to make it easier to compare costs
and tariffs between microcredit institutions
when looking for a loan.
The national strategy for financial inclusion has the specific goal of increasing the
proportion of all MSMEs receiving 'responsible credit' (lending that takes into account
someone's ability to pay) to 40% by 2018
from 30% today and to increase the share of
responsible borrowing at formal financial
institutions from 23% to 28% of all adults by
the same year.
Experts say Paraguay needs to improve

its regulatory framework and unify all of
the regulatory structures so that the main
MFIs in the country are supervised by one
agency.
The country's cooperatives have the
broadest reach in providing basic savings
and payment services within the formal
financial system. For example, 19% of adults
in Paraguay report having an account at a
cooperative versus 12% at a bank, according to the 2013 national financial inclusion
survey.
However, despite their vital importance,
the cooperatives are regulated by a different
agency from the banks.
Unlike Bolivia, NGOs that offer microcredit are not regulated in Paraguay. Small
lenders - known as casas de crédito and
casas comerciales - also go unregulated.
"The country is making a number of steps
in the right direction," says Julia Corvalan,
the strategy adviser at Fundación Paraguaya,
the only microfinance NGO in the country
that is a member of the Smart Campaign, a
global organization committed to the protection of microfinance consumers.
"However, the co-ops must fall under the
same regulatory framework as the banks.
The regulations must be comprehensive
and across the board."
Delivering results
Two of the most impressive aspects of the
Bolivian microfinance industry are the low
non-performing loans rates and the comparatively low interest rates.
The NPL rate in Bolivia is 1.63% against
between 2% and 6% depending on the sector in Paraguay, according to Asofin and the
Paraguayan Central Bank.
Experts say one of the reasons Bolivia has
a low default rate is because microfinance
institutions are held in high esteem and its
indigenous population has a strong sense of
duty to pay back loans.
In Bolivia, the average interest rate
charged on microcredit is 14.1% annually,
whereas in Peru it is around 30% and in
Paraguay ranges from 9% to 36%, depending on the level of risk and the specific
sector.
Bolivia's extensive microcredit industry
has led to economies of scale and enabled
lenders to bring rates down, helping it to
become one of the world's most advanced
microfinance industries.
The sector still has potential to grow. And
as it expands, Bolivia is charting a path for
other countries in Latin America working to
improve financial inclusion. LF

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