Agricultural loans next challenge for Central America's microfinance sector - Cabei

Tuesday, September 6, 2011

Agricultural loans are the next frontier for Central America's microfinance sector, according to the Central American Bank for Economic Integration (Cabei).

"The goal is to diversify microfinance products to allow us to direct funds toward sectors that haven't been reached up to now, such as the rural agriculture sector," Jorge Godoy, a manager of Cabei's SME division, told BNamericas.

Cabei is one of the largest second-floor microfinance lenders in Central America, working with 130 strategic allies, including regional microlending association Redcamif and US non-profit Accion International.

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"The challenge now is for Guatemala, Honduras and Nicaragua - the countries with the highest poverty indicators in the region - to recover some of the economic confidence that existed before the international [financial] crisis," Godoy noted.

By regaining the trust of international investors, microlenders in these countries can increase the sector's market penetration to a new level, he added.

"The challenge now is to bring microfinance to rural areas. By the nature of the business, microlending has been concentrated among the small [urban] traders benefiting from high customer turnover. There's a pending gap in the market," Godoy said.

Honduras-based Cabei has about US$250mn in its microfinance loan portfolio at present, a figure that has stayed stable since 2009. The multilateral was established in 1960 by the governments of five Central American states and now includes 13 member countries.