Public Policy on Microfinance in South America

The purpose of this paper is to analyze the impact of public policies in various countries of South America on the development of microfinance (MF). A broad definition of public policy has been used in this work, as it covers specific legislation seeking to develop more inclusive financial systems; government participation in official bank programs; second-tier bank funds; the use of targeted funds and guarantee and intelligent subsidy schemes, etc. Particular attention is focused on financial system regulatory frameworks, as they tend to play a fundamental role in the success of such programs. An analysis is made of best practices recommended by international agencies, matching them against the existing framework for microfinance activities in the countries analyzed. The main conclusion that can be drawn is that despite the very varied nature of the initiatives pursued, one common element observed in all the countries surveyed is the role played by commercial banks in MF development. Nevertheless, note should be taken of the direct and indirect role played by the state in encouraging the involvement of the financial sector as the leading provider of MF, a role that is in general based on criteria of selfsustainability and commercial practices.