MICROCAPITAL STORY: What Are the Total Global Assets in Microfinance? Leading Sources Weigh In: MIX, Microcredit Summit, MicroBanking Bulletin (MBB), ACCIÓN, Microfinance Gateway, BlueOrchard, UNCDF, Unitus, CGAP

Numerous challenges hinder the spread of accurate information on microfinance. Due to the lack of transparency of many microfinance providers, much information is never publicly disclosed. Much of the information that is reported is obsolete and outdated—often two or more years old. As there is limited and inconsistent regulation of microfinance providers, third party confirmation of data is often not required, and providers have little incentive to verify their own figures. Essentially, there is no standardized system to which all microfinance providers report and from which accurate information can be retrieved. Thus, the task of determining a basic statistic—such as the total amount of assets invested in microfinance worldwide—can prove nearly impossible. Calculating this figure requires a worldwide census of microfinance institutions (MFIs), coops, government banks, credit unions, self-help groups, etc. Needless to say, no such census exists.

However, MFIs are increasingly reporting their performance data to international databases. This is particularly common among efficient, well-managed programs that are looking to attract investors. The Microfinance Information eXchange (MIX, MIX Market) contains information on over a thousand MFIs, nearly a hundred investors and 165 partners. It provides financial data, outreach and impact data, as well as contact information for the organizations. Other features, such as “Comparative Analysis,” allow members to conduct more complex analyses. According to data from the MIX on 817 MFIs (581 of which reported), the total assets in MFIs globally is USD 22.44 billion. About 81 percent (pg 1) of the MFIs are externally audited, and 28 percent have been independently rated, usually by a firm specialized in microfinance. One weakness of this source is that the MIX does not adjust MFIs’ reports to account for subsidies or to standardize loan loss accounting.

The Microcredit Summit (MCS) Database contains limited information on a large number of MFIs. Each year, this organization publishes a summary report of outreach statistics on the microcredit industry. The 2006 report included information on 3,133 MFIs that reported reaching over 113 million clients, 82 million of whom fall into the “poorest clients” category (pg 21). The strength of this source, besides its larger sample of MFIs, is that it lists data by region, and it differentiates between types of clients reached—total clients, poorest clients, women clients. However, unlike the MIX, MCS focuses on outreach, not profitability, and does not officially report financial data. Information not publicly disclosed in the annual report is confidential.

The Microcredit Summit also commissions papers. In 2006, one such paper, called Microfinance Through the Next Decade: Visioning the Who, What, Where, When, and How (pg 10), written with the support of ACCIÓN International, put the total number of borrowers at 28.8 million and the total loan portfolio at USD 9.14 billion globally. The paper took into account 378 microfinance institutions.

The MicroBanking Bulletin (MBB) has a substantially smaller number of participating MFIs, but also a higher quality of information. It is published semiannually by the MIX. The MBB follows a full range of financial information and adjusts the financial statements that it receives for subsidies and non-standard loan loss provisioning. Approximately 80 percent (pg 2) of the reporting MFIs have external audits or ratings from independent agencies that specialize in microfinance. In the Spring 2007 issue, 200 MFIs from all over the world participated. The MBB reported that the average amount of assets in each of these MFIs was USD 10.23 million (pg 41) in 2005. Thus, these 200 MFIs had over USD 2 billion in total assets. One might be tempted to multiply the MMB average by the total number of MFIs worldwide (estimated at 10,000 by BlueOrchard.org) in order to determine the total global assets in microfinance. However, this would be erroneous. The microfinance industry, like other industries, is concentrated. Just 9 percent of the world’s MFIs account for 75 percent of the borrowers. There are thousands of small, unprofitable MFIs that do not report to international databases. The MBB can reasonably be considered a representation of the group of larger MFIs that are concerned with their financial performance, but not a representation of MFIs in general.

The MBB is a particularly useful source because it allows for comparison of MFIs based on a number of criteria, including age, outreach, region, scale, lending methodology and financial sustainability. For instance, a for-profit MFI averages USD 14.1 million in total assets, USD 5.3 million more than a non-profit MFI. MFIs in Latin and Central America have significantly more in total assets, USD 19.7 million on average, than MFIs in other regions. The MENA region (Middle East and North Africa) has the next highest with USD 10.3 million per MFI. The MBB also allows for multiple variable comparisons based on scale and region.

Working papers or white papers are another valuable resource, particularly when searching for a specific piece of data. A white paper published in 2003 by Social Enterprise Associates, entitled The Business Case for Investment in Microfinance, estimated the market supply (total assets) of microfinance at approximately USD 4 billion. However, inconsistencies are commonplace in this field. The very next year, Positioning Microfinance Institutions for the Capital Markets, another white paper produced by the same organization, estimated that USD 30 billion of the USD 300 billion microfinance market demand had been met. This leap in estimate from 4 billion to 30 billion in just one year is indicative of the obvious discrepancies uncovered as one conducts microfinance research.

Other organizations, both public and private, provide useful microfinance information on their websites. BlueOrchard, a private Swiss company that identifies, monitors, and reports on microfinance institutions for current and potential investors, estimates that only five percent of the microcredit demand is being met. BlueOrchard predicts that the total demand for microcredit over the next five years will be between USD 10 to 20 billion. The United Nations Capital Development Fund (UNCDF), the World Bank, Unitus, the Microfinance Gateway and the Consultative Group to Assist the Poor (CGAP) all offer statistics and information on microfinance. However, because of the nature and focus of these organizations, the majority of their information on global microfinance is in terms of outreach, rather than assets. For example, a 2004 Occasional Paper by CGAP estimated that there were over 750 million savings and loan accounts in financial institutions that served a clientele that is generally below the economic level reached by commercial banks. When information on assets is provided, it tends to be specific to a country, region, or organization.

Additional Resources:

“The State of Microfinance—Outreach, Profitability, and Poverty.” By Adrian Gonzalez and Richard Rosenberg, available at info.worldbank.org/etools/library/latestversion.asp?232702

Microfinance Information eXchange (MIX)

MIX: About MIX Market

MIX: Comparative Analysis (Total Assets, All MFIs, accessed September 3, 2007)

Microcredit Summit (MCS)

MCS: State of the Microcredit Summit Campaign Report 2006

“Microfinance Through the Next Decade: Visioning the Who, What, Where, When, and How.” By Elisabeth Rhyne and María Otero, published by ACCIÓN International, commissioned by the Global Microcredit Summit 2006, available at http://www.microcreditsummit.org/papers/Plenaries/RhyneOtero.pdf

ACCIÓN International

MicroBanking Bulletin (MBB)

MicroBanking Bulletin, Issue No. 14, Spring 2007.

BlueOrchard

BlueOrchard: Microfinance: Did you know?

Social Enterprise Associates

The Business Case for Investment in Microfinance.” Published by Social Enterprise Associates.

Positioning Microfinance Institutions for the Capital Markets.” By Drew Tulchin, published by Social Enterprise Associates.

Consultant Group to Assist the Poor (CGAP)

Financial Institutions with a ‘Double Bottom Line': Implications for the Future of Microfinance.” Published by CGAP, Occasional Paper No. 8, July 2004.

United Nations Capital Development Fund (UNCDF)

World Bank

Unitus

Microfinance Gateway

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