> Posted by Jeffrey Riecke, Communications Assistant, CFI

Peru ranks as the developing country with the best environment for microfinance, followed by Bolivia, Pakistan, the Philippines, and Kenya, in that order. Latin America and the Caribbean is ranked as the best region in the world for microfinance, followed by Sub-Saharan Africa, Asia, Eastern Europe and Central Asia, and lastly the Middle East and North Africa. Globally, the microfinance industry is improving, fueled largely by an increase in credit bureaus, improving client protection, and the spread of regulatory frameworks for mobile banking.

These are a few of the big takeaways from the Global Microscope on the Microfinance Business Environment 2013, which was launched yesterday in Guadalajara at the IDB’s 2013 Foromic conference. Now in its seventh year, the Global Microscope annual series examines the environment for microfinance – and increasingly financial inclusion – by considering the national regulatory environment and the corresponding institutional framework.

Originally developed by the Economist Intelligence Unit in collaboration with the Multilateral Investment Fund and CAF, this year’s study is also sponsored by Citi Microfinance and CFI. This year’s report scores 55 countries, and in general, the global picture is promising. Since last year, 30 countries improved their scores, 19 fell back, and the scores of six countries remained the same. The majority of improvements this year came from advancements in institutional frameworks. The scores for regulatory framework and practices mostly declined.

As a region, Latin America and the Caribbean countries claimed half the slots in the global top ten, with Peru maintaining its previous ranking as the top country in part through improvements in regulation for mobile banking. Unlike the rising score for Peru, Bolivia’s score fell, due to restrictive new legislation, although not far enough to dislodge Bolivia from its number 2 ranking.

Most countries in the Asian region saw big improvements upon last year due to changes in their institutional frameworks, especially better dispute resolution systems and credit bureaus. Such advancements in credit bureaus were seen in Cambodia, for example, which rose two spots this year to the sixth position. India improved to 16th from 22nd, thanks to significant progress in establishing grievance-redress systems.

Although Middle East and North Africa received the lowest overall score of the five regions, its four countries all showed slight improvements from last year.

This year’s Global Microscope used the same set of indicators and methodology as the previous report. Compared to last year, consultations among MFIs, networks, regulators, consultants, and investors were increased to gather additional insights, and the report addresses the broadening of the industry from microcredit, to microfinance to financial inclusion.

To access the report, click here.

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