What this means is that MFIs might manage their risk inaccurately, as they assume their SME borrowers to have greater repayment capacity than they might. Many MFIs still work with rudimentary segmentation of their clients. The case of Bolivia highlights that it takes the regulator's insistence to push them to analyze their clients more deeply. It would be hard to argue for more regulation in the sector, at least in Latin America, yet regulators are ever more watchful lately as they see microfinance as a possible hotbed of overindebtedness and abuse of low income clients.
Our approach is proactive rather than reactive, where client data quality is strengthened and its storage is handled flexibly to enable financial institutions to better understand their clients, and the risks lending larger amounts to them entail.