Florent Bédécarrats

Co-optation, Cooperation or Competition? Microfinance and the new left in Bolivia, Ecuador and Nicaragua

Abstract The past decade has been marked by the resurgence of leftist political movements across Latin America. The rise of the ‘new left’ masks the ambivalent relationships these movements have with broader society, and their struggle to find an alternative to the prevailing development model. Filling the void left by failed public banks, the microfinance sector has grown significantly across the continent in an increasingly commercial form. Analysis of Nicaragua, Ecuador and Bolivia reveals that their new governments share a common distrust of microfinance. Yet, in the absence of viable alternatives for financial service provision, governments and microfinance stakeholders are forced to coexist. The environment in which they do so varies greatly, depending on local political and institutional factors. Some common trends can nevertheless be discerned. Paradoxically, the sector seems to be polarised into two competing approaches which reinforce the most commercially oriented institutions on the one hand, and the most subsidised on the other, gradually eliminating the economically viable microfinance institutions which have tried to strike a balance between social objectives and the market.

Assessing Microfinance: Striking the Balance Between Social Utility and Financial Performance

Microfinance was designed as a development tool, but remains firmly anchored in the market economy, creating an ambivalence that blurs the traditional distinction between the political and economic, the public and private, the commercial and social. Its hybrid nature makes it unique among development tools: microfinance benefits from financial, fiscal and regulatory support, while maintaining relative independence from governments and donors and their fluctuating agendas. The result is a heterogeneous and complex sector that articulates different scales: the local, given it is microfinance, and the national, as states closely supervise retail-banking activities. But it is also a global field, involving various transnational actors: NGOs, cooperation agencies, investors, private entrepreneurs, multilateral agencies, and so on.