Finance and Investment

Women Entrepreneurs in Peru Gain Access to Education and Capital

The South American country of Peru has an especially well developed microfinance infrastructure. According to an annual ranking of the microfinance business in 55 countries prepared most recently in 2009 by the Economist Intelligence Unit, Peru has the best business environment for microfinance in Latin America and the Caribbean. Goldman Sachs and the Multilateral Investment Fund of the Inter-American Development Bank (MIF/IDB) in partnership with Mibanco, the leading microfinance institution in Latin America, Universidad del Pacífico in Ecuador and Thunderbird School of Global Management in Glendale, Arizona, launched a 10,000 Women certificate program in Peru that graduated its first group of entrepreneurs in late 2010. This program is unique in that the 10,000 Women scholars also have access to capital. Carmen C. Mosquera, an operations officer with the MIF/IDB in Lima, talks about microfinance in Peru and the importance of fostering entrepreneurship through business-skills training and capital access.

Knowledge@Wharton 10,000 Women: What is MIF/IDB?

Carmen Mosquera: We are a fund that is part of the Inter-American Development Bank group and is focused in three areas: promoting access to finance, to basic services and to markets and capabilities. The 10,000 Women project enters in the access to markets and capabilities area. We have two similar components here -- one is the 10,000 Women initiative [a business certificate program for small- and medium-enterprise owners whose goal is to train 700 women] and the other is our SALTA project that tries to reach more than 100,000 women in Peru [to develop their skills to become successful microentrepreneurs].

K@W 10,000 Women: How is the 10,000 Women program in Peru unique?

Mosquera: The 10,000 Women program in other countries is great in giving training and formal education to entrepreneurial women. We have very extensive access to finance in Peru and one of the most developed microfinance industries. A lot of microentrepreneurs here have access to capital, but it is very difficult to have access to education. The education is very important for them because it does something for their business management. They now have the instruments and tools to manage their businesses much better than before. We started with Mibanco to find women for the program and now we are also working with other microfinance institutions. We are working with micro and small enterprises that sell up to 750 thousand soles, which is USD$280,000.

K@W 10,000 Women: Why is Peru's microfinance infrastructure so extensive?

Mosquera: Primarily because 95% of the businesses here are microenterprises. The market demands that kind of financing. Banks don't have the mechanisms and procedures to get into the microfinance market. The cost structure is not very attractive for very corporate banks to have to go to far places and deal in small amounts. Still, now they are trying to break into microfinance because it is very profitable.

K@W 10,000 Women: What is the business climate like for women entrepreneurs in Peru?

Mosquera: For the past few years, we have had economic stability, and the exchange rate has been established, which promotes exporting and other related industries. A few years ago, it was very hard to start a new small or micro business. All the public procedures were difficult. It has changed and improved. When you need start-up capital, we have a lot of NGOs (non-governmental organizations), microfinance institutions and other non-bank institutions that can provide capital to get started.

In terms of the capabilities to manage and start a business, women are limited. Women in Peru go to school much less than men -- primary, secondary and university. Women are less prepared to start a business and to make it successful. But they do it anyway. That's the importance of this 10,000 Women program. It gives them the ability not only to stay in the market, but also to grow.

K@W 10,000 Women: Are most microfinance institutions in the country focused primarily on women?

Mosquera: It depends on the institution. Some are more focused on women, while others don't have any gender limitations. I can say that women are better at paying back their loans.

K@W 10,000 Women: What are some examples of women-owned businesses in Peru that have participated in the program?

Mosquera: The women own lots of different types of businesses. I can remember two very different businesses -- one sells shoes, jackets and office supplies made from leather, and another woman started a school. Others make and sell clothing. The women who [graduated from the first cohort] are so satisfied with what they have achieved and what they have learned. They are applying their skills to their businesses so they can grow. The program has been successful because every partner is contributing something to make the experience better: You have finance institutions that have been operating around the world, you have Thunderbird, which has already worked with Goldman Sachs and has existing expertise, and Universidad del Pacífico teaches these kinds of business courses. Mibanco and other financial institutions are there to support the women's growth needs.

K@W 10,000 Women: How much capital can women entrepreneurs access to help run their businesses?

Mosquera: Their loans with the microfinance institutions grow as their sales, assets and equity are growing. There is no guarantee that they will get loans. It is always subject to a financial analysis of their business. But these women have no problem accessing capital.

K@W 10,000 Women: Do you see the program having a profound effect on Peru's future?

Mosquera: The First Lady of Peru, Pilar Nores de Garcia, attended the graduation ceremony and was very interested to look for some way to expand this opportunity to many more women. Women own at least 50% of the country's microenterprises. When a woman and her entrepreneurship grow, she translates this growth and economic improvement to her family and her community. If you can do it in a massive way, it's much better.

K@W 10,000 Women: What advice would you give women entrepreneurs around the world who struggle with the issue of accessing capital?

Mosquera: The first step is showing that your business is growing. Microfinance institutions do not give loans based on education or cash flow. You have to show that your business is growing and has assets. You also need to show that even with small amounts -- $30 -- you will pay the loan back. With education, you will be able to better manage your business and to grow.