Lack of legislation for microfinance institutions in Central America
One of the main obstacles to the development of microcredit institutions in the region is the lack of a legal framework to integrate them in to the formal financial system.
Friday, August 29, 2008
Reynold Walter, president of the Microfinance Network of Central America (Redimif) and who inaugurated the sixth edition of the Central American Microfinance Conference yesterday, commented that, except for Honduras, no other country has a legal framework for that sector.
The "No Payment" movement is scaring US and European investors, threatening the arrival of $70 million worth of funds for micro finance companies.
A law regulating the microfinance market would open the opportunity to capture savings that currently can only be done through cooperatives and banks.
Despite a less favorable macro-economic environment, the credit portfolio of the micro-finance sector in Central America grew 28% in 2007 in comparison to the previous year.
The microfinance sector in Nicaragua, once the best in the region, is just beginning to overcome the deep crisis caused by the ‘No Pago’ (Non-Payment) movement.
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