Niche lenders feel safe

Even as the global credit crunch is forcing lenders to shut their doors, microfinance experts said their thriving niche likely will be insulated.

Microfinance groups lend anywhere from a few hundred dollars to a few thousand at rates that would make most bankers blush. In Latin America, the average interest rate on a microloan is 30 percent -- and can run as high as 65 percent -- even as defaults run in the low single digits.

That makes microfinance a safe haven for investors to stash cash in times of trouble, said Elizabeth Littlefield, chief executive of The Consultative Group to Assist the Poor.

''In crisis after crisis, microfinance institutions have been the best place to have your money,'' she said Saturday during a microfinance roundtable at the Inter-American Development Bank's annual meeting.

Rafael Llosa, general manager of MiBanco, a Peruvian microlender with more than 250,000 customers and $382 million in loans, said delinquency rates at MiBanco are 2 percent. During a banking crisis in Peru a few years ago, commercial banks saw defaults hit 12 percent, even as MiBanco hovered at 4 percent, he said.

Another reason for the sector's resiliency is that it represents a small part of most institutional portfolios, said Paul DiLeo, managing director of Grass Roots Capital Management, a microfinance investment fund.

But the global credit crisis is having some impact. Some organizations funded by remittances from the United States are seeing their funding dry up, and investors across the board are becoming more cautious.

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