The BBVA Microfinance Foundation, invited by the SEGIB to provide expertise on entrepreneurship of vulnerable people in the 11th Ibero-American Business Meeting

The BBVA Microfinance Foundation (BBVAMF) participated in the preparatory meeting for the 11th Ibero-American Business Meeting, a forum of 50 experts from international organizations, foundations and corporations, among others, that have defined the lines of work of the next Summit of Heads of State and Government to be held in October 2018 in Colombia, with the slogan “Latin American Economic Outlook 2017: Youth, Entrepreneurship and Education for Development”.

These institutions provide the Ibero-American Secretary General, organizer of the governmental conference, with its knowledge and best practices on these issues that are relevant to the region. The experts will share their experience and aid in setting the agenda to be discussed at the summit.

The BBVAMF shared its experience in supporting the sustainable and inclusive economic and social progress of the most disadvantaged people through funding productive activities and how entrepreneurship is an effective way for them to improve their quality of life, their families and communities.

“In the absence of alternative employment, and due to the low productivity and informality of the economy, many people in Latin America choose to start an entrepreneurial activity to meet their income needs. These tend to be one-person or family businesses in unproductive sectors that do not allow human capital accumulation and have limited access to financing, which prevents growth. In fact, SMEs account for 80% of business and only contribute between 16 and 36% of gross domestic product”, said Laura Fernández Lord, who is responsible for Gender Equality and Empowerment of Women at the BBVAMF, during her speech at the “Financing entrepreneurship” panel at the preparatory meeting.

In Latin America, half of the population, 210 million people, is excluded from the financial system, which prevents individual initiative from being transformed into high value-added entrepreneurship.  Asymmetries in information (creditworthiness, credit history, lack of reliable accounting, etc.), combined with the lack of guarantees and a banking model that is not adapted to the needs of small businesses, considerably reduces access to financing and if this is achieved, it is very short lived. This financial gap contributes to reinforcing the spiral of informality and productivity.

“Closing the gap between informal and formal financing remains one of the main outstanding tasks to allow greater average productivity of vulnerable entrepreneurs and create jobs,” Laura Fernández Lord highlighted.

Thirty-two percent of customers of the BBVAMF has risen above the poverty threshold after two years in one of the Foundation’s institutions. Their assets increase at an annual rate of 29%, and their sales and profits grow by 16% annually. In 2015, customers provided employment to 214,817 people, 8% of entrepreneurs created a new job vacancy after two years in the BBVAMF. However, only 15% have one or more employees. As the vulnerability of customers decreases, surpluses are higher and their capacity to generate employment also grows. The challenge, therefore, is to make their businesses more productive, through access to credit and improving their entrepreneurial skills and abilities.