Microfinance in Ecuador in the Public Sector

Abstract

The purpose of this study is to examine micro finance in the public sector in Ecuador, specifically looking at the Banco Nacional de Fomento and its first microfinance program, the 555 plan, which was implemented in May 2007. The 555 plan gives borrowers $5,000 over 5 years at 5% interest rate. Because the 555 plan started in 2007, it is still not certain that loans will be repaid at the end of five years nor is it certain that this will be a successful poverty alleviation program. By combining an examination of microfinance and the Grameen Bank, the socio-economic and political stability of Ecuador, and the 555 program objectives and operations, we will be able to see that despite political and economic instability, the 555 program has potential to eliminate poverty by employing more specialized and individualistic strategies for borrowers, focusing on education and lending to women.