Finance for development. Microfinance and its importance on economic development

Abstract

The aim of this document is to focus on the concept of microcredit and its relevance on social and economic development. Microcredit is linked to the expression “responsible productive finance” and they are part of the social inclusion framework. I am going to focus the paper on the general characteristics and on the current situation in Latin America with the specific example of the BBVA Microfinance Foundation and its six microfinance institutions. On the other hand, we will deepen in interest rates problems, administrative costs handicaps, guarantees issues, risk evaluation problems, idiosyncratic characteristics, credit for women, problems of economy informality, sector diversification, products development, client treatment and new models developed (banking correspondents). The paper also shows some main improvements and risks such as the concept of overindebtedness of low-income people or the lack of impact valuation.