Progreso: a step forward in the third microfinance revolution

Manuel Méndez del Río Piovich, Chairman of BBVA Microfinance Foundation

The online publication Progreso is a BBVA Microfinance Foundation (MFBBVA) initiative reporting on microfinance regulation world-wide. Our aim is to bring together the most relevant legislation, jurisprudence, and legal reports and news, providing stakeholders with a clear overview of general tendencies and approaches. We hope this will encourage more informed decision-making in the microfinance industry, as the best way to ensure the healthy growth of this new kind of loanbook, which is the most efficient way to fight against poverty.

Our aim is to bring together the most relevant legislation, jurisprudence, and legal reports and news, providing stakeholders with a clear overview of general tendencies and approaches

The earliest attempts to launch a microcredit industry date back to the mid-20th century and the enactment of programs channeled through national public-sector institutions with the support of multilateral agencies. Sadly, these somewhat one-sided initiatives failed to foster individuals' productive and entrepreneurial skills.

Insight into these shortcomings inspired the idea of using market drivers as enablers for individuals with little money but with the imagination and capacity to implement sustainable productive activity. The idea was to use a commercial model that could generate sufficient resources to become self-funding, while servicing the financial needs of a segment of the population largely excluded from formal financing.

This unleashed a comprehensive overhaul of the methods used to fight poverty. Some called it a philosophical revolution, others simply referred to it as bringing democracy to finance.

Throughout the 1970s and ‘80s, microfinance gradually took shape in the hands of non-profit institutions and NGOs who saw their activity expand significantly. From these beginnings, a fledgling industry began to emerge in what some authors have termed "the second microfinance revolution". As it matured in the 1990s, its distinguishing features were a substantial improvement in procedures and the progressive influx of new players.

In this second decade of the 21st century, the microfinance sector has developed a complexity and professionalism unthinkable a few years ago. More important still, it has undergone significant expansion, albeit only reaching a very small proportion of the disadvantaged population as of yet. While customer numbers for the microfinance sector nowadays are far from negligible, such finance is still only available to a tiny minority of the underprivileged. If its contribution is to be significant, the sector needs to grow rapidly and make exponential gains in scale.

The MFBBVA Group is convinced that microfinance is currently poised to become a driving force in the advancement of society thanks to its accumulation of expertise, its achievements so far and its manifest capacity to rise to challenges.

In this scenario the BBVA Microfinance Foundation is determined to establish best practices in what I would venture to call "the third microfinance revolution". This online publication will focus on two aspects of microfinance that help the sector expand more efficiently. It will highlight the most significant regulations and detect trends that may affect microfinance institutions. And it will disseminate the principles of excellence in corporate governance in order to spread a culture of transparency and credibility throughout the industry as a whole.


Progreso aims to help diminish the institutional obstacles that impact the market as a whole, such as inefficient enforcement of legal rights, gaps in the rules for foreclosure of guarantees, shortcomings in the legal system, etc. It will also tackle those specific to the individual financial institutions in the sector, such as insufficient or improper credit documentation and the absence of specific regulation, among others.

Progreso will record the latest developments in corporate governance. In the third revolution in this sector, good corporate governance will make a decisive impact on growth.

Despite some tightening of governance standards following the global financial crisis, a significant majority of microfinance institutions display notable shortcomings and very rudimentary systems of corporate governance.

More advanced and certifiable systems of corporate governance are essential for the sector to grow. This transformation will tap more private-sector funding sources, such as customer deposits and bank lending, and also make it possible to raise capital on the open market.

The BBVA Microfinance Foundation is so convinced of the importance of corporate governance that it has taken on the highest standards of excellence for itself, and also altruistically offers governance workshops for managers of other microfinance institutions for the sake of the industry as a whole.

In short, Progreso will provide an over-arching view of the regulations relating to the microfinance sector, which in the absence of its own specific regulations is too often subject to inappropriate, penalizing or distorting general rules that hamper its performance as a driving force for progress and development.

The BBVA Foundation Group has 2.7 billion reasons to exist: the 2.7 billion people excluded from formal financial systems all over the world, especially the 250 million living in Latin America. The launch of our online publication today therefore aims to shed greater light on this industry, which has an enormous under-served potential clientele and enormous capacity to generate development by enabling entrepreneurial initiatives from a segment of society currently overlooked in the formal economy.