This paper presents a first set of variables that possibly play a role in the uneven development of the microfinance sector in Latin America. A cross-country regression is applied by using a unique dataset on the outreach of microfinance institutions in the year 2001. Results indicate that microfinance is more present in high-inflation areas and in countries that receive a higher proportion of international support. Moreover, human capital and population density play a positive role in explaining the differences. The results indicate that the regulatory environment does not seem to play a significant role, but the proxy for financial liberalization does.microfinance; Latin America; financial sector development; aid; inflation.