Based on research conducted by the MIX: Microfinance Information Exchange on 170 Eastern European and Central Asian microfinance institutions, this report was released in November 2007 as a 20 page publication of MIX: Microfinance Information Exchange Inc., available here. 

The Eastern European and Central Asian region has the lowest population density and highest income levels of the developing world. These characteristics lead to low outreach and an unclear division between microfinance and small and medium enterprise (SME) finance. Only 20 percent of the population lives on less than 2 USD per day compared to 80 percent in Africa and South Asia.

From 2005 to 2006, the ECA region increased in outreach by 35 percent to 1.75 million borrowers. The region’s total loan portfolio increased by 50 percent to over USD 4.5 billion. The most rapid growth occurred in the Balkans followed by the Caucasus and Central Asia. Outreach in the region increased by 25 percent as a result of the expansion of banks and non-bank financial institutions. Microfinance institutions founded by international donors or with international support experienced the strongest development, making up 36 percent of total growth in the region. Local credit unions and NGOs saw little expansion.

In 2006, the ECA region demonstrated overall profitability with a return on assets of 1.25 percent and a return on equity of 5.35 percent. Portfolio-at-risk levels were among the lowest in the world due to careful management of delinquency, but may be a factor in the region’s limited outreach.

In the ECA region, the leading 25 microfinance institutions accounted for more than two-thirds of the market, representing15 percent of registered institutions.

Higher income countries in Central and Eastern Europe tended to have less competitive microfinance sectors, as many commercial banks in these regions offered similar finance services at lower costs.

There is a lack of savings mobilization in the region’s microfinance sector causing a reliance on international donors and investors. Development financial institutions (DFIs), microfinance investment funds, and commercial banks each provided between 25 and 30 percent of debt financing, with two-thirds of all financing coming from foreign sources.

By Melissa Duscha