Apoyo y Servicios Financieros para la Microempresa: Lecciones para El Salvador

This paper derives lessons for EI Salvador, distilled from theory and from experience elsewhere, about the promotion and financing of small and microenterprises. Equity considerations require both to incorporate the poor into growth processes in the long run and alleviating the costs for them of structural adjustment in the short run. While efficient financial services are important (among other things) for the first task, their contribution to the second is very limited. Credit matters only when productive opportunities exist; thus, the target population are the productive poor. Credit, however, cannot create such opportunities. While not all producers demand credit, most demand deposit facilities. When they demand loans, they want more than funds; they are interested in an established relationship with the intermediary. This requires an image of permanency that only viable institutions can provide. Viability is fiscally sound and introduces compatible incentives. To reach the poor, new fmancial technologies and organizational designs must be promoted

Condiciones de Exito para una Reforma Financiera

This paper examines conditions for success of a financial reform. Special attention is devoted to a clear definition of the objectives for reform. These objectives spring, in turn, from the view of finance either as a mechanism for market integration or as a fiscal tool. The shortcomings of finance as a fiscal instrument are examined. The components of a market-oriented reform are identified

Financial Reform and Marginal Clientele in Developing Countries

This paper explores the implications of financial reform for marginal clientele in developing countries. It first surveys increasingly more ambitious attempts at reform, as a consequence of the failure of the old interventionist and protectionist strategies of development. It claims that the role of government has shifted from the control of financial prices and amounts to the preservation of macroeconomic stability and financial system solvency. Financial reform is a necessary but not a sufficient condition for increased access to financial services by marginal clientele. Actually, lack of access is due to a much lesser extent to market failure than to incomplete organization and limited institutional and physical infrastructure. Belief that the observed patterns of interest rates and limited access to formal credit in rural financial markets were due to market failure led, however, to the incorrect design and eventual failure of most small farmer credit programs. The main flaws were a generalized lack of concern for risk and for institutional viability. In addition to new policies and institutional design, however, financial innovations will be required. Local financial institutions may become sources of innovation, but cannot reduce systematic risk sufficiently. The development of financial market systems and networks will be needed in order to overcome the limitations of local intermediaries, both in a micro and a macroeconomic sense