Peru offers the best microfinance business environment for the third year running, according to the Economist Intelligence Unit’s (EIU) ‘Global Microscope on the Microfinance Business Environment 2010’. Yet the top spots have been shuffled this year, with the Philippines advancing to second place, overtaking the 2009 runner-up, Bolivia. New to the top 10, Kenya managed to climb three ranks and squeezed into 10th place overall, while Pakistan jumped from 11th to fifth place thanks to regulatory reforms and an increased range of microfinance services. In turn, two countries – Uganda and Nicaragua – fell out of the top 10 to take 11th and 13th spots, respectively.
The diverse characteristics of the top 10 countries show that gross domestic product (GDP) growth and political stability are not enough to secure a strong microfinance business environment. Rather, political will, the regulatory capacity to support privately provided microfinance, and a strong culture of entrepreneurship are the most important factors.
The list of most-improved countries underscores this economic and political diversity. The top five index climbers – Madagascar, Pakistan, Nepal, Azerbaijan and Argentina – come from four different regions. All five saw improvements to their regulatory framework and institutional development, with three also enjoying a better investment climate for microfinance.
“The Global Microscope supplies investors, lenders and donors with a comprehensive and comparable snapshot of each country’s microfinance sector,” said Vanesa Sanchez, project manager for the Global Microscope. “Regulatory frameworks are relatively advanced, but countries still fall short of providing the optimal conditions for microfinance.”
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