Review of the prospects for rural financial development in Bolivia

This report summarizes the opportunities for development of viable, self-sustaining institutions to meet the financial service needs of entrepreneurs in rural Bolivia. Characteristics of successful rural financial institutions are described, followed an assessment of various alternative institutions. Of particular interest is the potential replicability of key elements of the highly successful village banking system (Unit Desa) of the Bank Rakyat Indonesia. The Unit Desa system is one of the few examples, worldwide, of a successful, profitable financial institution that makes small loans and serves small savers. Although direct replication of the Unit Desa system is not a viable option for Bolivia, considerable potential exists for stimulating the development of a more institutionally diverse rural financial landscape. The report also examines the potential for expanding the reach of commercial banks, credit unions, and nongovernmental organizations. While all are viable, the greatest growth potential is among commercial banks. In promoting the development of rural financial institutions, USAID should focus on providing technical assistance, rather than capital.