Peru Microfinance Investment Environment Profile

Publication Date: Jan 2005
Published by: New Jersey, US: Princeton University
Document Type: Paper

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Investing in Peru

This document is targeted at potential investors interested in the microfinance sector in Peru. It creates a framework for assessing the country-specific investment risk for commercial investments and also identifies incentives and disincentives for microfinance institutions (MFIs) to disclose their important information to investors.

The framework of the study that the paper adopted is as follows:

Country profile- analyzed against the following metrics:

• Political climate,
• Economic climate,
• Key economic activities,
• Social climate.

Overview of the microfinance sector – the average annual growth rates for the loan portfolios have been 32.3 %.

• Policy support for microfinance sector,
• Composition of the sector,
• Semi-formal MFIs,
• MFI rates,
• Sustainability,
• Outreach.

Regulatory framework - The Superintendencia de Banca y Seguros (SBS) is the public agency that regulates formal MFIs. This section summarizes the regulatory framework with respect to licensing, capital reserves, guidelines on business activities, and reporting and supervision requirements.

• Proposed reforms.

Incentives and disincentives for information sharing:

• The disincentives for information sharing overshadow the incentives:
  • Perception of trade offs,
  • Lack of enforcement capacity,
  • Competition between MFIs,
  • Lack of institutional capacity,
  • No obvious benefits.
• Incentives that make efforts to formalize the informal sector:
  • Provision of technical assistance,
  • Formalization of the informal sector,
  • Means of attracting capital,
  • Information provision for internal use.

Investment climate

• Demand supply gap in the provision of microfinance services,
• Opportunities for investors,
• Ease of investing and exit options,
• Transaction costs.