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I would like to thank participants at a seminar organized by the Ministry of Finance in La Paz in September 2015; as well as Ravi Balakrishnan, Sergio Cardenas, Martin. Čihák, Lucyna Gornicka, Emanuel Kopp, Sonia Muñoz, and Helen Wagner for their comments and suggestions.
Entities Specialized in microfinance consist of banks specialized in microfinance and SME banks. Others NGOs also engaged in microfinance, known as development finance institutions (IFDs), are in the process of being integrated into ASFI regulations. Currently, they are self-regulated by FINRURAL, an association of these NGOs.
Productive sectors are defined broadly as non-service sectors, including agriculture, mining, and manufacturing.
The FSL refers to Law 393 adopted on August 21, 2013. Subsequent Presidential Decree 2055 were issued in 2014 to implement the Law and the resolution on intermediate annual credit targets was adopted in January 2015. The impact of interest rate caps started to materialize only after July 2014 and that of credit targets after January 2015.
The state-owned banks are Banco Union and Banco de Desarrollo Productivo.
Currently, only state-owned banks are dealing with non-conventional guarantees. Indeed, many IFDs have been lending based on non-conventional guarantees since 2006 for small loans and limited to a small proportion of borrowers.
The Council consists of the Minister of Economy and Public Finance (chair), the Minister of Planning, the Governor of the Central Bank of Bolivia, the Executive Director of ASFI, and the Executive Director of APS.
The Depositor Protection Fund replaces the old Financial Restructuring Fund which could be drawn upon in the event of the liquidation of a banking institution.
Individual banks manage their own guarantee funds.
See ASFI Regulation 570/2015, July 2015.
IMF (2012) provides a discussion on the indicators to assess excessive credit growth. Annual growth of credit to GDP at or above three percent can serve as an early warning signal one to two years before financial crises.
The gap is calculated as the difference between the credit-to-GDP ratio and the long run trend of this ratio, which is derived by using a Hodrick-Prescott filter on quarterly data. The gap has been found to provide a strong early warning signal of an impending crisis (Drehmann and others 2014).
The interest rate ceiling came into effect in July 2014 (Supreme decree 2055). And banks still had room to lend to non-productive sectors as the intermediate annual credit quotas only came into effect in January 2015.
The net financial margin is the difference between financial revenue, such as interest revenues; and financial expenditure, such as deposit interest payments (as a percentage of total portfolio).
NPLs in mid-year often tend to be higher than the year average. Nonetheless, the trend remains to be seen given the slower economic growth and lower commodity prices.
The calculation does not include tourism and intellectual products, which were classified as productive sectors in July 2015.
In 2014, loans for social housing were 18.5 percent of productive sector loans or 5.8 percent of total loans.
The test completely abstracts from a series of other drivers such as interest and noninterest income and expenses and bank behavior. In reality, a doubling of NPLs would very likely trigger knock-on effects.
Bolivia ranks second after Peru in the Global Microscope on Microfinance 2013 report (EIU 2013). Banco Sol’s effective interest rate was 65 percent per year when it began operations in 1992 with 4500 clients. Today, its annual interest rate is around 20 percent
The “blue list” of existing good borrowers even make it easy for banks to just increase the loan size to existing customers.
The data on Microfinance borrowers of ASOFIN (the Association of 7 Microfinance Institutions) is a subset of ASFI data of microfinance borrowers. The latter includes microfinance borrowers served by other banks (non-members of ASOFIN).
These include NGOs engaged in microfinance. IFD’s currently accounts for 2.7 percent of total portfolio under ASFI’s regulation.