This week we’re sharing information about the success of microfinance in Peru. Oikocredit’s Regional Manager for the Northern Andean Region in South America- Frank Rubio- recently hosted a webinar on Oikocredit’s microfinance partners in Peru, such as PRISMA!
When you think microfinance, countries like India or Bangladesh might come to mind…
However, according to the Economist Intelligence Unit, the leading country is Peru! This is the 2nd year Peru has been awarded “Best environment for microlending”, due to a positive regulatory framework, investment climate, and the quality of services offered. In 2010 the microfinance sector in Peru grew at an average rate of 19%!
Oikocredit has been investing in Peruvian microfinance since 1980, and has impacted more than 2.7 million end-borrowerswith almost $8 million in loans. Peru is a very important country in Oikocredit, ranking in our Top 10 portfolios. Our project partner PRISMA Peru sums up our dedication to investing in Peru in their slogan: “25 years working where the need is greatest”.
We choose to partner with microfinance organizations in Peru because of statistics like these:
- 33% of the population lives below the national poverty line of $1.25 a day
- 2.1 million children live in extreme poverty, representing more than half of the overall impoverished population
- 69.7% of the rural population lives in poverty[ii]
- only 25% of the population has formal access to credit
Like many other countries in the Global South, Peru’s economy is dependent on mineral exports, especially gold[iii]. A mining export economy fueled by foreign direct investment can lead to a growing rich-poor gap, a problem which also plagues many Latin American countries[iv]. Microfinance seeks to address these inequalities and empower Peruvians living at the Bottom of the Pyramid to grow small businesses and improve their lives.
Despite a GDP growth rate of 8% (comparable to India!), Peru still has a high poverty rate. PRISMA Peru was founded in order to fight poverty and chronic malnutrition in 1994. Today it makes loans of more than $12 million USD to poor Peruvians, 73% of whom are women, and 47% of whom live in rural areas[v]. PRISMA offerstraining, microinsurance, and housing loans in addition to traditional microfinance.
PRISMA is a good example of the success that the microfinance industry has had in Peru. Its typical borrower is a 39 year old female without primary education or access to public health services, working in the informal sector in a rural area. The organization is noteworthy for its strong savings program, competitive interest rates, pricing transparency, and dedication to social performance- characteristics which are on the rise among Peruvian microfinance institutions.
As one of the leading advocates for social measurement in microfinance, Oikocredit is proud to call PRISMA Peru our partner: PRISMA has become the first microfinance institution (MFI) to use the PPI (Progress Out of Poverty Index), a poverty-screening methodology designed by Grameen Foundation and Mark Schreiner[vi]. “PRISMA is one of the best models of PPI implementations in Peru,” said Yolirruth Nunez, Regional Social Performance Management and Capacity Building Coordinator for Oikocredit’s programs in Peru and Ecuador. And they have been spreading the word: PRISMA’s Managing Director, Diego Fernandez Concha, has been traveling the world teaching other MFIs how to use the PPI to better reach their target populations[vii].
Peruvian microfinance is now leading the world: competitive lending has helped to drive down the price of interest rates and has extended access to financial services for many families[viii]. The potential for new microfinance clients in Peru is huge. In the coming years, Peru could see an estimated 40% growth in the microfinance market[ix].
Oikocredit is firmly placed within this center of growth in the microfinance world. Operating in Peru since 2005, our microfinance partners reach over 2.7 million end-borrowers, and our fair trade cooperatives include 70,000 small farmers in rural communities[x]. At Oikocredit we combine our social mission, tailoring services to meet the needs of our end-borrowers. We select project partners that have a strong focus on poverty when considering new clients, such as the following Peruvian MFI partners: PRISMA, Manuela Ramos, and FINCA Peru[xi]. When possible, Oikocredit works with project partners to expand services (such as gender training and health programs) to fit the needs of their clients.
[ii] UN Habitat Report. [http://en.mercopress.com/2010/03/27/gap-between-rich-and-poor-in-latinamerica-is-largest-in-the-world-says-un]
[iii] Mineral exports are expected to represent 56% of total exports for 2011. Dube, Ryan. [http://www.foxbusiness.com/markets/2011/09/13/perus-2011-mineral-exports-seen-at-247-billion-vs-217-billion-in-2010/]
[iv] In 2009 the Peruvian government collected $800 million from just four gold mines! Shumsky, Tatyana. [http://www.marketwatch.com/story/large-gold-mines-dominate-peru-economy-report-2011-10-14]
[viii] MIX Market cited in Microfinance Africa.net, Schmall, Emily, http://microfinanceafrica.net/tag/microfinance-in-peru/
[ix] Lionel Derteano of microloender Edyficar, cited in Microfinance Africa.net, Schmall, Emily.
[x] Slide 3-4/21 Oikocredit in the Field: An Update from Peru. Frank Rubio. http://www.slideshare.net/Lgage/oikocredit-in-the-field-update-from-peru
[xi] [Page 5] http://www.oikocredit.org/documents/Social%20Performance%20docs/PDF/ppi%20brochure%20ecuador-peru%202011.pdf