Bolivia is famed for its oil and gas industries alongside its enormous mineral extraction market. However, Bolivia has been diversifying its industries, placing more focus into tech manufacture, telecommunications, fintech and also financial services.
Over recent years, oil and gas in Bolivia has performed worse year on year. To combat this, Evo Morales and his government have initiated a number of law changes to stimulate a budding banking sector and microfinanc
e industry, which in turn have economically transformed rural development and productive sectors.
Over the past decade, credit as a share of GDP has increased from 35% to 43%, whilst the number of borrowers as a share of the adult population has doubled. Underpinning this change has been the introduction of the 2013 Financial Services Law (FSL).
Financial Services Law in Bolivia
The 2013 FSL was adopted in order to replace the 1993 banking law, a law which served the major financial entities rather than the ordinary consumer and the small business owner. The FSL also mandated that financial services had a social mandate. This extra function was to contribute to smaller businesses in the less densely populated zones in order to grow primary sectors and increase social development in non-urban territories.
The objectives of the 2013 Law were to:
- offer protection to financial consumers and their savings rather than just the large corporations.
- offer greater transparency of the financial system
- ensure access to financial services was available universally
- increase the stability and solvency of the financial system
- outsource services to less developed areas.
To fulfil these aims, the government set up a deposit insurance scheme and credit registry whilst also implementing a number of core Basel II and Basel III principles. To ensure all of these objectives are being met, the government takes a dominant position in banking regulation.
Financial regulation authorities
The FSL created a number of regulatory divisions such as the Ministry of Economy and Public Finance, the Ministry of Planning and Development, the Supervisory Authority Financial System and the Supervision and Control Authority of Pension and Insurance.
This extensive range of regulatory bodies make up the Financial Stability Board and within every sector of financing, they monitor and supervise all monetary issues. The state even sets maximum cap interest rates a bank can charge and also determines the long loan repayment grace periods for people to pay back loans.
Supporting small businesses
The government gives every chance for small businesses to run effectively without being hamstrung by banks. Alongside these financial protections, the state also owns a financial institution to provide extremely low-rate credit to small businesses getting off the ground.
Bolivia introduced these business-friendly rates and grants to support and nurture the smallest businesses into life. In turn, this has allowed businesses to thrive and has allowed primary industries, such as agriculture, the ability to upgrade equipment, put down fertilizers and grow their farms. 2018 figures show a dramatic increase in agricultural productivity, with the industry making a 7% margin on 2017 figures. Social housing projects in rural areas is also another area which financial institutions have helped to develop.
The new law also introduced an extra 3% tax on bank profits which further protected against banks getting too powerful.
Benefits for business and investment
The FSL has provided Bolivia with a financial stability it has never known and consequently, business is booming. Bolivia now has one the fastest growing economies of any Latin American nation with a 6-year average GDP growth rate of 4.7%.
There has never been a better time to invest in Bolivia. Starting a business garners support from the government and, in the form of credit leniency, from the banks as well. Morales has made it very clear that any foreign investment is no doubt welcome, although the country requires trade partners, and not bosses. The government is confident that investors will take profits, but regulations currently aim to keep revenues within the nation so as to boost the economy.
A look at Bolivia’s fintech market
One area which is highly suitable for foreign investment is Bolivia’s expanding financial technology (fintech) market. Financial analyst Jorge Velasco believes the emergence of new companies or startups specializing in financial technology is a very interesting investment opportunity. As Bolivia’s financial laws change, fintech is certainly a market which will grow exponentially.
Contact us to get started
Bolivia is primed for foreign investment and business ventures, sporting robust financial regulations and a healthy, growing economy to boot. With greater stability in commercial and financial policy and a pro-business government, now’s the right time to build your Bolivia-based business.
At Biz Latin Hub, we help expanding companies do exactly that. Bolivian bureaucratic regulations for foreign entrepreneurs and investors can be complex. Our legal and expatriate professionals demystify the company formation process and guide you through compliance procedures to ensure your company starts off on the right foot in your new market.
Talk to us today about our suite of market entry and back-office services, and how we can help you get started in Latin America. Contact us at [email protected] for more information.