Servicios Financieros para la Microempresa: Dificultades y Soluciones Posibles en El Salvador

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Ohio State University. Department of Agricultural, Environmental, and Development Economics

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This paper discusses issues in microfinance development, as they may be relevant for El Salvador. It describes the country's informal sector and identifies various types of productive agents. It examines the types of financial services that are appropriate for different classes of entrepreneurs and it discusses the role of credit and of the state in microenterprise development and poverty alleviation. In particular, it emphasizes the importance of permanent lender-client relationships. The paper also discusses the difficulties of financial transactions, highlighting problems with information and contract enforcement. It distinguishes between collateral-intensive and information-intensive lending technologies. The paper addresses the limitations of informal markets and how credit constraints limit entrepreneurship. Lending technologies must resolve the typical problems of financial markets and organization designs must deal with multiple dimensions of principal-agent problems.