Bolivia : financial sector assessment

Although the New Economic Policy initiated in 1985 cut inflation to 16% and enabled bank deposits to return to previous levels, economic growth has failed to recover and the perceived risk for private investors and the cost of financial transactions both remain high. Against a background description of this history, this report assesses the present state of the country"s financial sector. Individual sections: outline the characteristics of the financial system; describe its regulatory institutions (the Central Bank and the Bank and Insurance Superintendencies); identify needs for reform in banking, insurance, and commercial laws; and examine private banks, state banks and cooperative institutions, capital markets, informal credit markets, and the demand for credit in key economic sectors. A summary final chapter presents recommendations for USAID intervention. The principal finding is that Bolivia"s financial sector has neither the quantity of domestic savings nor the diversity of financing instruments needed to support economic development. The sector is overly dependent on highly volatile short-term credit provided by commercial banks, and markets for medium- and long-term finance are still very small. Commercial banks are weak and noncompetitive.