Microloan Challenges and Possibilities in Globalization and FreeTrade The Argentinian Case

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Micro-loan Challenges and Possibilities in
Globalization and Free-TradeThe Argentinian Case
November 2004
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Microloans- Introduction

• In Argentina , Micro-loan Phenomenon arose
  during the last decade as a result of the
  increase in the unemployment and poverty levels
  which left millions of Argentinians on the
  margins, excluded from the formal circuit of
  credit.

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Micro-loan Situation The Argentinian Case

• Micro-loan dimension
• Organization
• Access to resources
• Demand characteristics and transformation
• Effects on poverty reduction
• FODA Analysis
• Challenges

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Organization

• The main Institutions which work with
  Micro-loans in Argentina
• Non governmental Organizations
• Government offices/ departments
• Banks

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Organization

• Non Governmental Organizations
• Positive aspects
• They work according to a standardized methodology
  that changes from one Institution to the other to
  render the programme successful ( associations,
  solidarity within the groups, support to
  women,etc.)
• They work with a simple and standard procedure.
• Assistance is not limited to a financial one ( it
  means qualitative changes in beneficiaries
  attitude).
• They know the place where they work very well and
  they work in close contact with the beneficiaries
  .

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Organization

• Non Governmental Organizations
• Negative aspects
• They have some organizational problems.
• They have some resources problems
• Financial resources external financial support
  is needed because of lack of self-support
  problems with fund raising.
• Human resources problems associated to voluntary
  work.
• They work with high interest rates to cover
  operative costs.

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Organization

• Non Governmental Organizations
• Results
• Qualitative and Quantitative changes in the
  beneficiaries.
• High rates in credit refund ( more than 90 ).

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Organization

• Government Departments
• Positive aspects
• They can reach more people.
• More possibilities in fund raising.
• They work with lower interest rates ( subsidy
  interest rates).

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Organization

• Government Departments
• Negative aspects
• They dont follow a suitable methodology to make
  the programme succeed ( high amounts of money,
  individual credits,etc.)
• It does not favour personal growth. It can be
  used to gain political support.
• Lack of personal relationship with the
  beneficiaries.
• Bureaucratic procedures ( changes in the forms,
  poor information,etc.)
•      

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Organization

• Government Departments
• Some Micro-loan programmes from the Government
• National
• Manos a la Obra Programme
• Provincial
• BANexo Programme
• CAM Programme

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Organization

• Government Departments
• Results
• Although governmental programmes are devised to
  help the poor, they tend to fail because of lack
  of a suitable methodology, lack of personal
  development goals and political support restrains.

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Organization

• Banks
• Banks ( specially state ones) work together with
  the non governmental organizations and the
  government departments with direct or indirect
  support ( fund raising, fee cash,etc).
• Some Banks
• Provincia Bank ( BANexo Programme )
• Nación Bank (FoMicro Programme )

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Access to resources

• Economic or financial resources
• Non Governmental Organizations
• Most of Micro-loan Institutions have not reached
  self-support
• That is why many of them need external finance
  support such as
• Donations
• Public subsidies
• International Help IDB, WB
• Other sources FONCAP

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Access to resources

• Economic or financial resources
• Government Departments
• Until 2001 Argentina was not a first priority for
  the International Cooperative Institutions as
  regards poverty fight because of its high per
  capita income.
• From 2001, The Government has received
  International assistance for different Programmes
  including Micro-loan Programmes ( The World Bank
  has given 100 millions for Manos a la Obra
  Programme).

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Access to resources

• Economic or financial resources
• Problems
• Non Governmental Organizations - problems with
  fund raising due to lack of ads campaign, poor
  standardized procedures to provide information to
  prospective donors.
• Government- Wrong use of the financial support
  (fines have to be paid as supports were not
  applied to programmes).

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Access to resources

• Human resources
• Non governmental Organizations
• Positive Great quantity of volunteers
• Negative Personnel rotation
• Government
• Positive paid staff
• Negative a small staff in relation to the
  beneficiaries

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Demand characteristics and transformation

• Micro-credit demand has been changing during the
  last years. First it proved to be a valuable
  asset for the poor. Nowadays micro-credit demand
  belongs to the impoverished middle class ( new
  poor).
• Lower class
• First destination of Micro-credits.
• They are still the principal goal for the
  Government and the non governmental organizations
  assistance.
• Low socio-cultural level, low literacy level.
• They work in poor conditions.
• They are used to receive assistance from the
  Government.

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Demand characteristics and transformation

• Impoverished Middle Class
• They have begun to ask for micro-credits
  recently.
• Middle or high socio-cultural level, middle or
  high literacy level.
• They have work experience because they used to be
  employed in the past.
• They are not used to receiving assistance from
  the Government.

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Effects on Poverty Reduction

• The increasing poverty level ( in Argentina)
  during the last decade ( excluding millions of
  people from the formal circuit of credit ) paved
  the way to Micro-loans Institutions growing
  raise.
• Unemployment rates were gradually diminished
  because of the governmental and non governmental
  support to micro entrepreneurs through this
  financial tool.

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Effects on Poverty Reduction
Fuente Instituto Nacional de Estadísticas y
Censos - Encuesta Permanente de Hogares (EPH) -
Nota los Semestres corresponden a los resultados
de la EPH continua los periodos anteriores, a
los de la EPH puntual.
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Effects on Poverty Reduction
Fuente Instituto Nacional de Estadísticas y
Censos - Encuesta Permanente de Hogares (EPH) -
Nota los Semestres corresponden a los resultados
de la EPH continua los periodos anteriores, a
los de la EPH puntual.
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FODA Analysis
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FODA Analysis

• Positive aspects
• Suitable goal of the loans.
• Wide variety of choice ( governmental and non
  governmental loans).
• A decades experience
• Excellent quantitative and qualitative results
  (poverty decreasing level, literacy increasing
  level,etc.)

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FODA Analysis

• Possibilities
• Argentina shows a high entrepreneur culture.
• Knowledge about the importance and necessity of
  this instrument.
• Great increase in Micro-loan demand.
• Slight economic boost together with a favourable
  view in the international political area.
• Governmental support.

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FODA Analysis

• Weaknesses
• Fund raising problems.
• Human resources problems.
• Lack of a suitable standardized methodology ( in
  some cases)
• Organizational problems ( in some cases)

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FODA Analysis

• Threats
• Lack of a right legislation.
• Differences within political parties
• Poor working conditions ( low added value)
• Restricted financial resources
• Economic instability

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Challenges

• A suitable legislation to benefit
• Micro entrepreneurs
• Institutions
• Prospective donors
• Better access to financial resources
• Micro entrepreneurs enrolment in tax system
• Increase in the value of products

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Challenges...

• Foster relationship between different Micro
  enterprises.
• Educational Development Programmes.
• Positive answer to the increasing demand by the
  impoverished middle class.

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• Thank you for
• your time

Lic. Luciana Gineste