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Analysis of the financial self-sustainability of micro-finance institutions in Bolivia

Tania Elena RODRIGUEZ AUAD student laureate


°1975 Bolivia
Licence in economics, Universidad Católica Boliviana, La Paz, Bolivia, 1999

Análisis de autosostenibilidad financiera de instituciones de microfinanzas en Bolivia

Tania Rodriguez studied 9 Bolivian financial institutions specialising in micro-credit. She assessed their financial viability for the period 1993-1997. This research topic is certainly policy relevant : it is nowadays generally accepted that financial viability is the crucial issue in micro-credit programmes. From her conclusions, we mention the following :
- On the whole, the 9 institutions were able to expand rapidly, but they could only do so thanks to generous subsidies from abroad. This is not good news for advocates of the now orthodox, market-based, view on micro-credit.
- More positive is that during the period of study all 9 financial institutions evolved a larger degree of financial autonomy.
- An even more positive element is that in 1997 the three largest institutions, accounting for 70% of the combined loan portfolio, and which includes the famous Bancosol, achieved the threshold of financial sustainability. What this means is that the proceeds from the loans ensured a return on equity in excess of the opportunity cost of capital in the Bolivian financial market.
And this is truly good news. It shows that in the context of a country as Bolivia, even if more so in the city than in the countryside, banking on the poor can be profitable.
The thorough analysis of Tania Rodriguez provides fascinating evidence on the potential and limitations of micro-credit that will also be of interest to other countries. All the more so, since Bolivia is rightly considered a pioneer in this field.

report by Prof. Dr. Robbrecht Renard, Institute of Development Policy and Management, Universiteit Antwerpen, Belgium