There is a change going on in the way microenterprises are viewed. No longer are they the means by which poor people scrape a living; they can also be an integral part of the economy, providing jobs and contributing to economic growth. As such, there is a potential for them becoming valuable clients of the financial institutions who choose to specialize in microenterprise servicing. This article describes the variety of ways in which banks and NGOs are attempting to provide sustainable financial services as well as business support to the microenterprise sector in Latin America. It also examines how regional banks, such as the Inter-American Development Bank (IDB) can support and encourage new initiatives by banks and NGOs, as well as reforms to the banking regulations, which will ultimately benefit the development of microenterprises.
Are all entrepreneurs poor? Do all entrepreneurs see a lack of credit as their main constraint? Is poverty reduction the main objective of all microfinance institutions? Does lending methodology affect outreach? Can financially sustainable microfinance institutions (MFIs) reach the poorest of the poor? Do MFIs only reach petty traders? Do MFIs reach poor and remote areas? This article is structured around a discussion of common beliefs and assumptions regarding poor people and microfinance programmes. It reveals that many microentrepreneurs in Latin America are not poor, and many microfinance institutions lend mainly to non-poor clients. The microfinance industry consists of various market niches, with different services and varied objectives, and this diversity is necessary for achieving poverty reduction overall.