Document Type

Honors Paper

Advisor

Maria Cruz-Saco

Publication Date

2013

Abstract

This thesis examines the growth and development of the financial sector in Ecuador, focusing in particular on the products and services offered to low-income individuals, including, but not limited to microfinance. I examine the current problem of over-indebtedness, and evaluate both the supply/institutional side as well as the demand/client side. I conclude that while the market for microfinance institutions and low-income products and services is highly saturated and very developed, governmental interventions, structural problems and lack of accompanying financial capabilities have limited the effectiveness of the industry, and perpetuated indebtedness. I propose mandatory financial education programs provided by all financial institutions that target low-income clients in particular. This policy recommendation will improve the current microfinance model by increasing client financial knowledge, hence mitigating the harmful consequences of governmental intervention in the financial system.

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The views expressed in this paper are solely those of the author.