A warning has been given that 44% of microfinance clients are overindebted and that a change is required in the regulation in order to reverse the situation.
A study prepared by Grupo Analítica, SA for the Network of Microfinance Institutions of Guatemala (Redimif) said that the main problem behind the high level of indebtedness is the poverty that affects most of the debtors, many of whom live in the poorest departments, such as Totonicapan, Suchitepequez, Quetzaltenango, Zacapa and Sacatepéquez.
A law regulating the microfinance market would open the opportunity to capture savings that currently can only be done through cooperatives and banks.
The article by Byron Dardón in Capital.com.pa, reports that the bill on microfinance is expected this year and has the support of the Financial Inclusion Program of the Treasury of the United States, which promotes the adoption in Latin American countries of market governing rules.
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.
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.
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.
Reynold Walter, president of the Central American Network of Micro-Finance Institutions (Redcamif), reported that in 2007 some 99 micro-finance institutions from Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica and Panama granted loans worth US$676.6 million to 814,344 micro-businesses.
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