sources of data
DESCRIPTION
State of the Microfinance “Industry”: Outreach, Poverty, and Profitability Adrian Gonzalez (MIX/CGAP) Richard Rosenberg (CGAP) Access to Finance: Building Inclusive Financial Systems Conference World Bank, May 30 th 2006. Sources of Data. 1. Microbanking Bulletin (MBB) - PowerPoint PPT PresentationTRANSCRIPT
11
State of the Microfinance “Industry”:Outreach, Poverty, and Profitability
Adrian Gonzalez (MIX/CGAP) Richard Rosenberg (CGAP)
Access to Finance: Building Inclusive Financial Systems Conference
World Bank, May 30th 2006
State of the Microfinance “Industry”:Outreach, Poverty, and Profitability
Adrian Gonzalez (MIX/CGAP) Richard Rosenberg (CGAP)
Access to Finance: Building Inclusive Financial Systems Conference
World Bank, May 30th 2006
22
Sources of DataSources of Data
1. Microbanking Bulletin (MBB) adjusted, confidential
346 MFIs, 19 mill. borrowers in 2004
2. MIX Market (MM) unadjusted, public
(www.mixmarket.org)
671 MFIs, 22 mill. borrowers in 2004
33
Sources (cont’d)Sources (cont’d)
3. Microcredit Summit (MCS) Mostly confidential
Only # borrowers, # “poorest”, and OSSall self-reported
2153 MFIs, 90 mill. borrowers in 2004
Total without double counting:
~2600 MFIs, 94.5 mill. borrowers
44
Database coverageDatabase coverageCombined database includes
most “usual suspects” – so-called MFIs that use microcredit modelsdeveloped in the last 30 yrs
But database doesn’t includemany other “double-bottom-line” lenderswho serve some poor clients
--gov’t ag / development banks --savings & loan cooperatives --rural banks
Little data on savings services
55
Borrowers concentrated in AsiaBorrowers concentrated in Asia
EAP: East Asia & Pacific, SS Africa: Sub-Saharan Africa, LAC: Latin America & Caribbean,EECA: Eastern Europe & Central Asia, MENA; Middle East & North Africa
1156
21
67
02
04
06
08
0P
erc
enta
ge
of
Bo
rro
we
rs b
y R
egio
n
MENAEECALACSS AfricaEAPS AsiaSource: Combined MBB, MCS & MM
% of Total Borrowers by Region in 2004Total: 94 Million Borrowers
66
NGOs serve only a quarter of borrowers
NGOs serve only a quarter of borrowers
29%30%
24%
17%
Source: Combined MBB, MCS & MM
% of Total Borrowers by Type of Instituion in 2004Total: 94 Million Borrowers
Self-Help Groups Government
Licensed NGOs
77
No. of borrowers grows 12% / yr1999-2004
No. of borrowers grows 12% / yr1999-2004
Source: Combined MIX & MCS data
18% 17%
14%
8%
11%
8%
12%
0%
3%
6%
9%
12%
15%
18%
1999 2000 2001 2002 2003 2004 Average
88
Penetration rates by region:% of total population with loans in 2003-
2004
Penetration rates by region:% of total population with loans in 2003-
2004
2
1
1
1
1
0
0 .5 1 1.5 2 2.5
% total population with loans in 2003-2004
S Asia
EAP
LAC
SS Africa
MENA
EECA
Source: Combined MIX & MCS data
99
Penetration rates by countryPenetration rates by country
18
7
6
5
4
2
0
0
0 5 10 15 20% total population with loans in 2003-2004
Bangladesh
El Salvador
Nicaragua
Bolivia
B & H
Morocco
Egypt
Russia
Selected Countries
Source: Combined MIX & MCS data
1010
A Few MFIs Serve the Majority of Borrowersin a country
A Few MFIs Serve the Majority of Borrowersin a country
2003-2004
95
94
92
89
86
81
74
65
53
32
0 20 40 60 80 100Median Market Share (percentages)
10
9
8
7
6
'' 5 MFIs
'' 4 MFIs
Largest 3 MFIs
Largest 2 MFIs
Largest MFI
Source: Combined MIX & MCS data
1111
9
75
91
25
0
20
40
60
80
100
MFIs Borrowers
%
Worldwide concentration: MFIs & Borrowers
Worldwide concentration: MFIs & Borrowers
2003-2004
1,425smaller MFIs
145larger MFIs
%
%
%
%
Source: Combined MIX & MCS data
1212
How Profitable is Microfinance?How Profitable is Microfinance?
12
60
61
44
0 40 80
Gov.
NGOs
Licensed
Total
% of total clients served by sustainable MFIs
(private)
(state banks)
Source: Combined MIX & MCS data
1313
Profitability of NGO Microfinance Improving
Profitability of NGO Microfinance Improving
6453 56 58
0
20
40
60
80
2001 2002 2003 2004
% o
f N
GO
bo
rro
wer
s se
rved
p
rofi
tab
ly
Source: Combined MIX & MCS data
1414
MFIs reporting to MBB are More Profitable than Regular Commercial Banks
MFIs reporting to MBB are More Profitable than Regular Commercial Banks
Sources: -MBBs 9-12, and public ratings from Rating Fund for MFIs -BANKSCOPE for Commercial Banks in the MFIs’ countries
Average ROA=1.5(1799 Com. Banks)
Average ROA=2.8(344 MFIs)
01
23
4W
eig
the
d R
OA
Average 2001-2004
1515
Profitable MFIs grow fasterProfitable MFIs grow faster
16
2
010
20W
eigh
ted
Ave
rage
Gro
wth
Rat
e
Profitable Not ProfitableWeighted by number of borrowers
Annual Growth Rate in # Borrowers (weighted average)All MFIs and Regions
Source: Combined MIX & MCS data
1616
Half of Profitable MFIs Broke Evenwithin 3 Years of Start-up
Half of Profitable MFIs Broke Evenwithin 3 Years of Start-up
Source: MIX Market & MBBs 10-12
Fewer than 1/3 took more than 6 years
0-3 yrs
4-6 yrs
> 6 yrs
49%
19%
32%
1717
Some correlation between absolute loan size and depth of outreach
Some correlation between absolute loan size and depth of outreach
Pseudo R2 = 11.8%
Source: Pool Logit with all MM MFIs, all regions
% loans50-60∆=10 11%
(of median)
25% percentile30% percentile
010
2030
4050
6070
8090
100
% o
f po
or b
orro
wer
s
0 10 20 30 40 50 60 70 80 90 100
% loans below $300
Observed % Trend
% poor52-59∆: 79%
(of median)
1818
Do Smaller Loans Lower Profits?Not much, apparently.
Do Smaller Loans Lower Profits?Not much, apparently.
ROA vs. Loan size/GNI Per Capita
Source: MBBs 10-12 & MIX MARKET
E.g.,
Raising loans from 40% (median) to 50% of per capita income
Raises ROA only from –1.62% to –1.55 %
And the correlation is very weak
-50
050
0 100 200 300 400 500
Loan Size as % of GNI percapitaROA Trend
ROA = -1.9 + 0.007 * Loan Size, R2 = 0.5%
RO
A
1919
Does higher % of “poorest” borrowers hurt profits?
Not much, apparently.
Does higher % of “poorest” borrowers hurt profits?
Not much, apparently.
OSS vs. Proportion of Poorest Borrowers by MFI
Source: MCS 2001-2004
E.g.,
Raising % of poorest borrowers from 80% (median) to 90%
Lowers cost recovery from 69.5% to 68%
And the correlation is very weak
OS
S0
5010
015
020
0
0 20 40 60 80 100
Proportion of Poorest Clients
Self-Reported OSS Trend
OSS = 81.5 - 0.15 * Poorest, R2 = 1.2%OSS
2020
Regression results: efficiency Regression results: efficiency
Operating expense ratio: (admin cost / portfolio)
Scale (# borrowers) lowers costs early,
but not beyond 5,000-10,000 borrowers.
Bigger loan size lowers operating expense ratio
but not much.
For-profits tend to be more efficientthan not-for-profits
2121
Regression results: profitabilityRegression results: profitability
Not-for-profits tend to be more profitable than for-profits (?!)
Interest rates & spreads drive profitabilitymore than costs or productivity do.
Scale (# borrowers or asset size)doesn’t help profitability much.
Learning effect (age)doesn’t help profitability much.
2222
Main themes (1)Main themes (1)
Governments continue to be major, though unprofitable, microloan providers.
Microfinance is profitable and stable enough to move into the mainstream financial system.
NGOs/non-profits serve only ¼ of the clients, but probably have a viable long-term
role…..
2323
Main Themes (2)Main Themes (2)
Don’t expect scale to make an MFI profitable
if it hasn’t gotten there in the first few years.
Serving poor customers need not hurt financial viability.