MONTEVIDEO, Uruguay – The XIII Inter-American Forum on Microenterprise, or Foromic 2010, organized by the Multilateral Investment Fund (MIF), the Inter-American Development Bank (IDB) and Uruguay’s Ministry of Economy and Finances was held in Montevideo last week.
More than 1,300 representatives from microfinance institutions, banks, investment funds and insurance companies from about 40 countries attended the event.
“The most important aspect of credit in the long run is to generate conditions for recognition and attitudes that show that citizens are trustworthy,” said Uruguay’s President José Mujica during the opening ceremony of Foromic 2010. “In this way, they begin to climb out of poverty, not because they have a lot, but because of the trust they generate.”
Mujica said it’s the way to stimulate investment in low-income sectors of Latin America and the Caribbean, where “no one lends to the poorest because they can give no guarantee.”
IDB President Luis Alberto Moreno and Uruguay’s Minister of Economy and Finances Fernando Lorenzo signed a technical cooperation agreement for US$1.2 million during the conference, creating public and private sector partnerships in the country.
Moreno also signed an agreement for US$740,000 with the Tourism Corporation of Rocha.
Seven hundred microfinance institutions were in the region in 2009, officials from MIF reported during the conference. The institutions loaned US$12.3 billion to about 10.5 million clients, which shows that loans increased 13% compared to the same period in 2008.
The first loan
Yolanda Rondón has been selling maize for 25 years and she works 70 hours a week in a market in Lima, Peru. Her enterprising ability allowed her to integrate the entire chain of production and commercialization of her product: from seeding to wholesale to transportation.
It’s why she’s known as the “Maize Queen.”
Her life history, showcased in a video shown during the conference, is part of the six experiences chronicled by economist Daniel Córdova, director of the Graduate School of the Universidad del Pacífico, in his book “The new Peruvian heroes: Life Lessons from entrepreneurs who overcame poverty.”
The book was an initiative stemming from the 10th anniversary of Peru’s MIBANCO, one of South America’s largest microfinance entities, Córdova said. The testimonies from the banks’ clients show how they used loans that averaged US$1,500, but were as little as US$100, to escape poverty.
More than a loan
Jerônimo Ramos, director of Real Microcrédito, of the Group Santander in Brazil, said “the largest opportunity microloans offer is to identify the entrepreneurs who have a vocation. When the [entrepreneurial spirit] is encouraged, jobs are generated,” creating a “virtuous cycle.”
“With a small loan, the entrepreneur’s power is enabled and expanded, [and] he or she will hire another person, probably from the same community,” Ramos said. “The income that is generated is put back into the community.”
The size of the market, Ramos said, does not influence the industry’s strategies. He also said the loan itself is not enough to generate changes, which come with financial, civic and environmental education for the entrepreneurs and their children.
The Dominican Republic’s Banco Adopem is beginning to implement a project to “develop the chain of value for farmers, which means giving them instruction, offering technical assistance, linking them to entities that allow them to improve and become more efficient, and encourage direct exportation,” said Eva Carvajal, the bank’s vice president of businesses.
Banco Adopem ended in fourth place in the “Microfinances in the Americas: The 100 Best” ranking, conducted annually by MIF.
The role of government to support innovative projects
Grants and exemptions are measures expected from regional governments when they go toward supporting the creation of renewable energy microenterprises, said Patricio Boyd, rural operations director for the Argentine microfinance institution Emprenda.
“Given the enormous degree to which governments of the world have subsidized conventional energy sources, it would be very interesting to see them move part of that amount to renewable energy resources, which then would take off very quickly,” he said.
Latin American governments, Boyd said, need to establish concrete energy policies.
“If a private company wants to go to an area to offer its clients renewable energy products and, three months after making that initial investment, the government declares that it is going to bring electricity to that area with renewable or conventional energy, the announcement itself kills the [company’s] initiative.”