The State of Microcredit - Outreach, Profitability, and Poverty (Presentation)
2006, Gonzalez, A. & Rosenberg, R.

What leads to the profitability of a microfinance institution?

This presentation studies the microcredit industry, focusing on outreach, poverty and profitability.

The presentation has the following sources of data:

• MicroBanking bulletin;
  
• Mix Market;
  
• Microcredit Summit.

The presentation provides the following information on its data coverage:

• The data includes microfinance institutions (MFIs) that use microcredit models developed in the last 30 years;
  
• It does not include "double- bottom-line" lenders who serve some poor clients;
  
• There is little data on savings services.

The study finds that:

• Borrowers are concentrated in Asia;
  
• Non-governmental organizations (NGOs) serve only a quarter of borrowers;
  
• A few MFIs serve the majority of borrowers in a country;
  
• The profitability of NGO microfinance is improving;
  
• Profitable MFIs grow faster;
  
• There is a correlation between absolute loan size and depth of outreach;
  
• Smaller loans do not necessarily lower profits;
  
• "For-profit" MFIs are more profitable than "not-for-profits"?.

The main conclusions are as follows:

• Governments continue to be major micro-loan providers;
  
• Microfinance is profitable and stable enough to move into the mainstream financial system;
  
• NGOs have a viable long-time role;
  
• The scale of an MFI cannot make it profitable if it has not become profitable in the first few years;
  
• Serving poor customers need not hurt financial viability.

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Publisher(s):
Microfinance Information eXchange
Consultative Group to Assist the Poor

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