7 Pages Posted: 7 May 2009 Last revised: 26 Oct 2010
Date Written: May 1, 2006
What factors affect a microfinance institution’s outreach and profitability?
This document studies the state of microfinance, drawing from a database of 2600 microfinance institutions (MFIs), and focuses on outreach, profitability and poverty.
The paper presents the following sources of its data:
The Microcredit Summit (MCS) database;
The Mix Market (MM) database;
The MicroBanking Bulletin database.
It also presents the following limitations of the database:
Covers only a sub-set of poor people’s finance;
Contains little information about savings services.
The paper examines the following aspects of:
Geographic distribution; Distribution by institutional type; Growth in total borrowers; Penetration rates and concentration.
Industry profitability; MFIs versus commercial banks; Profitability and growth; Years to break even.
Profitability and client poverty: Loan size and client poverty; Loan size and profitability; Percentage of very poor clients and profitability.
The paper concludes that:
Governments continue to be the major providers of microcredit;
Private microfinance is profitable and stable enough to move into the mainstream financial system;
Microfinance is not dominated by non-government organizations (NGOs) - NGOs account for only a quarter of borrowers;
NGOs may play a more substantial role in the long-term;
MFIs that have not become profitable at an early stage should realize that growth by itself will not make them profitable;
There is no indication that serving poor customers hurts financial performance.
Keywords: Microfinance, outreach, sustainability, profitability, poverty
Suggested Citation: Suggested Citation
Gonzalez, Adrian and Rosenberg, Richard, The State of Microfinance - Outreach, Profitability and Poverty: Findings from a Database of 2300 Microfinance Institutions (May 1, 2006). Available at SSRN: https://ssrn.com/abstract=1400253 or http://dx.doi.org/10.2139/ssrn.1400253
By V. Hans
By Satyajit Roy
By David Hulme