Microfinance in Mexico nearing a crisis?

Source : Microfinance Focus

Alex Silva, president of the Canadian foundation Calmeadows, had an interesting interview on the specialist website Microfinance Focus. Silva has been involved in microfinance for the past twenty five years, particularly in South America, and gave his view on microfinance growth on the American sub-continent. While he considers that things have generally gone well these last few years, Alex Silva warns about the situation in Mexico, where the state of microfinance reminds him of the Indian one.

“A lot of what has happened in India could take place in Mexico”, he declared pointedly, as “the main features of Mexican microfinance are over leverage, where there is one methodology only, and too much government interference and government funding. The government needs to change the way it is doing things,” he stated, sounding slightly alarmist.

“There were unreasonable expectations by the public that microfinance is a miracle and on the other hand there was overselling to commercial investors about how good microfinance is in terms of being immune from failures and about its high yield,” he clarified, strongly pointing out that this was not true.

But Alex Silva stressed some good practices that Mexico could find inspiration from, such as Bolivia, “where a street vendor has access not only to loans but also to savings, remittances and microloans at a cost of 20%,” he is pleased to say, judging that cost “very decent” compared to personal loans from traditional banks. He specified that in most countries microfinance is organised among commercial players, who target small and medium-size businesses, and NGOs, who aim at the smallest of microentrepreneurs.