Apex Organizations and the Growth of Microfinance in Bolivia

Publication Date: Sep 1998
Published by: OSU Rural Finance Program
Document Type: Paper

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Does Bolivia need more apex organizations?

This paper examines the role of apex organizations (AOs) in the development of microfinance in Bolivia. The paper is divided into two sections:

• The first section discusses:
  • Demand and supply in the market for microfinance;
  • The regulatory framework for the sector;
  • The constraints on sustainable microfinance in Bolivia.
• The second section evaluates:
• The poor performance of a number of public-sector apex mechanisms;
• The predicament of a non-government AO;
• Options for the future.

The paper finds that:

• Although some AOs in Bolivia have provided timely loans to microfinance organizations (MFOs) in need of liquidity, they have not relaxed important constraints on funds for MFOs;
• AOs have not improved the sustainability of MFOs;
• They have not developed a market.

The paper lists the following reasons for the failure of AOs in Bolivia:

• They were not designed for the welfare of the poor;
• They have mostly served the needs of the donors or the Government;
• Start-up costs have been high in terms of time and labor;
• Government-owned AOs have failed to emphasize sustainability and have crowded out private AOs that did;
• The small number of MFOs in Bolivia has given AOs limited scope to lower costs through economies of scale.

The paper concludes that:

• Both government AOs and non-government ones are ill-suited to strengthen MFOs in Bolivia;
• Therefore, there are no compelling reasons to create more AOs in Bolivia.