PAPER WRAP-UP: 2007 Microfinance Information eXchange (MIX) Global 100: Rankings of Microfinance Institutions

Published by Microfinance Information eXchange (MIX), 32 pages, available for viewing here.

MIX recently surveyed a global sample of 820 microfinance institutions (MFIs) that had a combined loan portfolio of USD 24 billion with over 53 million borrowers and 64 million savers. In addition to ranking MFIs along single categories (outreach, scale, profitability, efficiency, productivity, and portfolio quality), the 2007 edition of the report also utilizes new composite rankings to highlight the 100 top-performing MFIs that have achieved high outreach and low transaction costs, while maintaining transparency and boosting profitability. The report concludes that leading MFIs broke performance records on all fronts.

The composite rank is an average of percentile ranks for profitable MFIs in each of three areas: transparency, outreach, and efficiency. Of 820 MFIs surveyed, 607 met the requisite of profitability, which was considered a necessary and primary condition for a well-rounded MFI. These MFIs had at least 90 percent cost recovery in 2006 and 100 percent during at least one of the three most recent years of operation.

Transparency was the area that most clearly distinguished top-scoring MFIs from the rest. The top 100 were those that maintained at least three years of standard performance results on MIX Market, the most comprehensive public database of MFIs, with the last two years verified by audited financial statements. Outreach made the second most important impact on MFI placement in the composite rankings, with the top 100 ranking, on average, in the 72^nd percentile. The efficiency ranking measures costs incurred by clients, which are influenced by transaction costs, loan loss, and MFI profits. On average, the top 100 MFIs ranked in the 57^th percentile, at about five percent of average loan portfolio, half of global margins. Only two MFIs reached scored above the 80^th percentile.

A geographical analysis of the MIX Global 100: Composite reveals that MFIs from all regions secured spots on the list. Latin America had the most countries (Bolivia, Colombia, Ecuador, and Peru) with top-ranked institutions: each with more than five MFIs in the top 100. However, second-tier spots between 50 and 100 were those claimed by 17 Latin American MFIs. Overall, the region reported relatively moderate growth, low outreach, and high transaction costs. On the other hand, relative to its size in the survey (five percent of all surveyed institutions), MFIs from the Middle East and North Africa, took more top spots than any other region. Moroccan MFIs significantly boosted the region’s overall performance, claiming five spots in the top 100 and two spots in the top three. Finally, India led the rankings with fourteen MFIs in the top 100, more than double the number held by any other country, with exceptionally high scores in the areas of outreach and efficiency. More specifically, ten of the 14 top-ranked MFIs served more than 100,000 borrowers. Also, relatively low personnel costs and high productivity were achieved through group-based approaches, along with low transaction costs (less than 3 percent of GNI per capita) and small profit margins (average of 1.9 percent net income relative to loan portfolios).

A second type of ranking methodology utilized by the report, category rankings, provides insights into and reveals commonalities among top-performing MFIs along a given dimension. No MFI achieved top ranks in all areas of performance; only seven MFIs from South Asia ranked in the top 100 in five or more categories. Results are summarized below by category.

Each of the top 100 MFIs by outreach reached more than 67,000 clients, with two-thirds of them reaching more than 100,000. The top 10 MFIs, led by banks in Eastern Europe/Central Asia and Latin America, served over 50 percent of total borrowers and 80 percent of total savers. The leading 25 nearly doubled their client base within a year, averaging growth rates of 75 percent. In addition, MFIs in the top 100, on average, mobilized deposits for clients equivalent to 80 percent of their borrower base.

In terms of scale, banks in Eastern Europe and Central Asia had the largest portfolios. The top 100 MFIs by scale claimed almost USD 20 billion, or 80 percent of global portfolio. The report notes that the Global 100 are small-balance lenders, addressing the common criticism that large loan sizes tend to skew measure of outreach and scale.

MFIs in Eastern Europe/Central Asia and Latin American/Caribbean take top spots for profitability rankings, boasting high yields in shallow markets with few financial services providers. However, all of the top 100 earned nine percent or more on average assets. Banks ranked the lowest in transaction costs.

The top 10 MFIs in efficiency rankings were able to significantly reduce the cost of service to their borrowers, paying an average of 3.7 percent of local per capita income, compared to the top 100 and the top 500, which averaged 8.7 percent and 15.1 percent, respectively. These leading MFIs also minimized client cost by maintaining low profit margins, averaging net profits of three percent of average loan portfolio. Group-lending methodologies seemed to be most effective in keeping personnel costs, the largest component of MFI transaction costs, to a minimum.

In terms of productivity, all top 100 MFIs served more than 230 borrowers per staff, more than doubling the 2006 benchmark of 112. Again, the use of large groups seemed to maximize staff capacity. However, the report acknowledges a trade-off between high staff productivity and default risk.

Portfolio at risk (PAR) over 30 days averaged just over two percent and all MFIs in the top 100 maintained zero or near zero delinquency in portfolios. NGOs dominated the top spots in this category, with 57 MFIs claiming zero arrears over 30 days in their portfolios. By contrast, only one bank made the top 100.

For MFIs and industry analysts who are interested in replicating these rankings, an Excel-based tool can be downloaded here (Industry Data > Analysis > Publications). Please note that the rankings are not intended to be used as buy list, nor as a rating, of the MFIs.

By Mary Fu

Similar Posts: