Managing the Risk of Growth in Microfinance – A Case Study of Bolivia

Bolivia is often quoted as a model of success in the microfinance sector. Its microfinance total gross loan portfolio is estimated to be more than USD 1 billion and includes almost half a million borrowers. It boasts some twenty active microfinance institutions (MFIs), among which there are four very strong players that are exemplary for the microfinance world in terms of growth, efficiency and innovation capacity: BancoSol, Banco Los Andes Procredit, FFP Fie and FFP Prodem. Strong competition amongst these and other medium-sized MFIs with excellent operations, such as Ecofuturo, Fades, Agrocapital, Crecer and Funbodem, has driven the interest rates charged to micro-entrepreneurs to some of the lowest levels in Latin America and worldwide. The average portfolio yield of a Bolivian MFI is between 20% to 25%.