The microenterprise sector represents a huge untapped market for the financial service industry in Latin America and other developing countries. Microcredit-one of a number of microscale financial services-is a lending technology that allows lenders to manage the risk and costs of lending to very small borrowers who are dependent on income from self-employment or business ownership. The data presented in this paper show that micro finance can be profitable, although the size of the loan portfolios and total assets remain small by the standards of commercial banks. Microcredit tends to have lower rates of arrears, but higher administrative costs than conventional loan products. Its higher operating costs are compensated for by higher interest yields.
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