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The State of Microfinance - Outreach, Profitability and Poverty: Findings from a Database of 2300 Microfinance Institutions

7 Pages Posted: 7 May 2009 Last revised: 26 Oct 2010

Adrian Gonzalez

Doing Business Report

Richard Rosenberg

CGAP

Date Written: May 1, 2006

Abstract

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:
Outreach:
Geographic distribution; Distribution by institutional type; Growth in total borrowers; Penetration rates and concentration.

Profitability:
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

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

Adrian Gonzalez (Contact Author)

Doing Business Report ( email )

2121 Pennsylvania Avenue, NW
Washington, DC 20433
United States

HOME PAGE: http://www.doingbusiness.org

Richard Rosenberg

CGAP ( email )

1818 H St NW
Washington, DC
United States

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