MICROCAPITAL PAPER WRAP-UP: 2008 MIX Global 100 Composite: Rankings of Microfinance Institutions

Published by Microfinance Information Exchange (MIX), 13 pages, available for viewing here.
The Microfinance Information Exchange, Inc. (MIX) has released its 2008 MIX Global 100 Composite: Rankings of Microfinance Institutions. The business results of 971 MFIs for the 2007 financial year were surveyed, from which 652 profitable MFIs were sampled to present the 100 leading MFIs. The ranking measures the balance achieved by an individual MFI of three key attributes: outreach, efficiency and transparency. Outreach is determined by the number of borrowers, the growth in borrowers, market penetration, deposit to loan portfolio ratio and the depositors to borrowers ratio. Efficiency is measured by the cost per borrower to GNI per capita ratio, profit to loan portfolio, the portfolio at risk greater than 30 days and the write off ratio. Transparency is measured by the annual reporting on MIX Market and audits on MIX Market.

The sample of MFIs served over 67 million borrowers with over USD 35 billion in loans and held USD 15 billion in deposits from 65 million microfinance clients. The results from this year highlight a variety of different observations. MFIs from South Asia and the Middle East and North Africa region (MENA) ranked higher in proportion to their numbers in the full sample. For example, South Asian MFIs made up 25 percent of the top 50 places, but represented only 15 percent of the full sample, while 50 percent of all MENA MFIs ranked in the top 100. India was the only country in the sample with 10 or more MFIs, and seven of these were ranked in the top 50. Only nine MFIs of less than five years of operations ranked in the top 100, while mature institutions with more than 10 years experience dominated the list.

When examining which attributes were particularly important in how MFIs were placed on the list, efficiency was highlighted as a challenge for many MFIs in the ranking. The average ranking for efficiency was only 56.5 percent, but the average ranking for outreach was 73.2 percent. This year was the first year that MFIs posted efficiency rankings above 80 percent, with five MFIs achieving this milestone. Client outreach also expanded faster than population growth, and so the average market penetration improved to 2.3 percent from last year’s 1.7 percent.

Additionally, there was a good deal of movement throughout the rankings. While two-thirds of MFIs in the top 100 for 2008 were also on the list for 2007, only two MFIs in the 2007 top 10 remained there in 2008. Much of the movement throughout the rankings from 2007 to 2008 was brought about as a result of changes in efficiency. Of the 51 MFIs that moved up 10 or more places over the 2007 rankings, two-thirds improved their efficiency ranking more than their outreach ranking. Moreover, while last year’s number two ranked MFI, Zakoura achieved above 80 percent in the outreach rankings in 2008, its efficiency ranking decreased to 53.48 percent, causing it to drop out of the top 10.

The methodology of the adopted approach used to establish composite performance is based on three principles: the factors that measure MFI success must be quantifiable, the approach should be straightforward and easy to reproduce, and the measures of success should encourage widely held goals of microfinance, such as outreach, efficiency, transparency and profitability. Once MFIs were screened for profitability, it is not ranked, and so higher profits do not secure higher rankings, insinuating that achieving the highest profit is not considered a goal, only a necessary condition for the other goals.

In the composite ranking, each MFIs performance results are converted to percentile rankings, and then into commonly used order rankings. Percentile rankings are used to compare and analyze data as they reflect both order and distance from next observation. While an MFI can rank first in overall performance, it can achieve a lower percentile ranking than its peers in certain categories.

Detailed Excel spreadsheets containing data used for rankings can be found here.

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