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The State of Microcredit - Outreach, Profitability, and Poverty (Presentation)
2006, Gonzalez, A. & Rosenberg, R.
What factors affect a microfinance institution's outreach and profitability?
This presentation studies the microcredit industry, focusing on outreach, poverty and profitability. The presentation used data from the Microcredit Summit (MCS) database, the Mix Market (MM) database and the MicroBanking Bulletin database
The data used in this study includes MFIs that use microcredit models developed in the last 30 years. It does not include "double- bottom-line" lenders who serve some poor clients and there is little data on savings services. Its findings include:
- Borrowers are concentrated in Asia;
- NGOs serve only a quarter of borrowers;
- Few MFIs serve the majority of borrowers in a country;
- 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 presentation emphasizes that interest rates & spreads drive profitability more than costs or productivity do. Scale (number of borrowers or asset size) and learning effect (age) doesn’t help profitability much.
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Publisher(s):
Microfinance Information eXchange
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