Apex Organizations and the Growth of Microfinance in Bolivia

Bolivia has the most advanced microfinance sector in Latin America and has been a model worldwide. Apex organizations-second-tier wholesaling mechanisms that lend and offer nonfinancial assistance to retailing microfinance organizations-have not been responsible for this success. Former and current Bolivian apex organizations have engaged in little market development. Some have provided some liquidity to microfinance organizations, but they have not played an indispensable role in the development of the sector. Other mechanisms for the delivery of donor aid have been more effective in strengthening the best Bolivian microfinance organizations. There appears, therefore, to be no justification for various apex organizations planned for the future. These mechanisms may actually discourage deposit mobilization and if they would disburse funds to unsustainable microfinance organizations, they may create an unfair playing field. This paper examines the role of apex organizations in the development of microfinance in Bolivia in two sections. The first one discusses demand and supply in the market for microfinance, the regulatory framework for the sector, and the nature of constraints on sustainable microfinance in this country. The second one evaluates the poor performance of a number of public-sector apex mechanisms and the predicament of one non-government apex organization. It also discusses options for the future