Responsible Finance Forum

Factors Influencing Poverty Outreach Among Microfinance Institutions: Colombia

guatemala-case-studyColombia’s economic policies and its aggressive promotion of free trade agreements in recent years have strengthened its capacity to weather shocks, such as the global financial crisis.



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Colombia’s economic policies and its aggressive promotion of free trade agreements in recent years have strengthened its capacity to weather shocks, such as the global financial crisis. Since 2011, real GDP growth has averaged 4%, continuing nearly a decade of strong economic performance. This is reflected by all three main rating agencies raising Colombia’s investment grade in 2011 (Bloomberg, 2011).

However, Colombia depends heavily on exports of energy and mining, so it is vulnerable to a fall in prices of commodities. Colombia is the fourth largest coal exporter in the world and the fourth largest oil producer in Latin America. Economic development is also hindered by inadequate infrastructure and an uncertain security situation. Its unemployment rate of 9.7% in 2013 remains one of the highest in Latin America.

The country has made significant progress in its fight against poverty, but the gap between conditions in urban and rural communities remains wide: 46.8% of the rural population is poor compared to 28.4% in urban areas. The same is also true in the case of extreme poverty: in rural areas 22.8% live in extreme poverty compared to 6.6% in urban areas. In June 2011, the government created the Department for Social Prosperity (DPS) to develop and enact all government policies to compensate victims of conflict and reduce poverty. They join the ranks of national organizations such as the National Agency for Overcoming Extreme Poverty (ANSPE) which attempt to lift the most vulnerable Colombians out of extreme poverty through a panoply of measures (ANSPE, 2015). Nonetheless, economic inequality—measured at a Gini score of 53.5 for 2012 (World Bank, Colombia country profile, 2014)—remains a major issue.

It is also relevant to our report to note that the Colombian government’s methodology for measuring poverty changed in 2011. This change led to a reduction in the number of people classified as living in poverty (DANE, 2012). For example, using the old method, poverty incidence for 2010 appears as 44.2%. Following the new method, this figure falls to 37.2% for the same year. Also, the methodology to establish the poverty line and extreme poverty line changed at the end of 2011. The idea behind the change was to include a more holistic metric that would take into account access to services like health and education, as well as income.

The Colombian MFI sector has grown steadily in recent years. The Financial Inclusion Report created by the Superintendencia Financiera of Colombia and Banca de las Oportunidades reports a growth rate of 15% in 2013 of the credit portfolio (SFC, 2014). This growth is led by a rise in banking institutions (71%), followed by NGOs (17%) and cooperatives (8%) (Colombia | Portal de Microfinanzas – CGAP, 2014). The program Banca de las Oportunidades was created in September 2006 with the aim of promoting access to formal financial services amongst families living in poverty, unbanked households, and micro/small enterprises.

There are very few unregulated institutions in the microfinance sector. Most large MFIs have become banks or are being placed under the supervision of the Superintendencia Financiera de Colombia. Cooperatives are supervised by the Superintendency of Solidarity Economy (SES). Since 2011, Asomicrofinanzas, the national microfinance network, brings together all major players of the microfinance industry in the country, including banks, credit unions, and NGOs. This body collects, manages, and disseminates information on the sector, including social performance and poverty outreach information.

In September 2013, 71% of the population had at least one financial product, according to the Asobancaria (Asobancaria, 2014). The number of accounts grew by 7.4% in the last four years. However, in 2013, 51% of these accounts had been inactive for the previous six months, which indicates the need for innovative savings products or incentive structures which promote usage.

Currently, financial inclusion is a public policy priority in Colombia. The country is working on ways to expand access to financial services for all Colombians, using systems of modern, safe and affordable payments. Indeed, Colombia ranked second in the ranking of the Global Microscope 2014, prepared by The Economist Intelligence Unit (EIU, 2014), of the best environments for financial inclusion globally.


  • The loan incentive structure of the MFIs in Colombia contains elements which encourage loan officers to reach poorer individuals in areas of higher banking saturation and clients in rural areas. MFI A and C achieve concentration rates close to the national poverty line.
  • The client profile of MFI A is 80% rural with the majority of loans disbursed to individuals in the agricultural sector. Women receive smaller loans than men but more repeat loans. Less poor clients receive larger and more frequent loans.

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