By Blaine Stephens, COO and Director of Analysis, MIX, published by the MixMarket Microbanking Bulletin, Issue 18, Spring 2009, pages 20-26, available at:
http://www.themix.org/sites/default/files/MBB%2018%20Spring%202009.pdf
According to the report in the Spring 2009 MixMarket Microbanking Bulletin, the analysis highlights several key trends that MFIs underwent in the 2005-2007 period. The publication of MIX’s Trend Lines 2005-2007 MFI Benchmarks provide a quantitative perspective on MFI operational and financial performance for that period. The overview of benchmark data for this report covers 487 MFS (representing microfinance in 78 countries, 82 percent of outstanding loans and 75 percent of borrowers at the end of 2007). The analysis also draws new data set of funding liabilities for MFIs as of 2007 and provides a framework of the evolutions in MFIs leading up to the financial crisis.
At a Glance (2005-2007)
• Borrower outreach grew at a rate of 26 percent across all regions. Loan portfolio grew faster at 47 percent in USD terms in 2007.
• Loan portfolio for MFIs in Eastern Europe and Central Asia at 38 percent.
• Middle East and NorthAfrica (MENA) expanded credit outreach the quickest at 41 percent.
• Asia added 12 million borrowers.
• The median MFI in all regions accessed commercial funding (deposits or commercially priced loans) to fund more than half its loan portfolio by the end of 2007.
• MFIs crossed the 50 percent threshold of commercial funding in 2006 and 2007. For example, MFIs in Eastern Europe and Central Asia (71 percent) and MENA (61 percent).
• MFI profits have flattened in recent years relative to their asset bases (small gains have been offset by rising funding costs as MFIs shift more funding to commercial sources).
MFI funding through new cross-border and local market debt (2005-2007)
• Debt financing has enabled sustained growth in borrower outreach and rapid growth in outstanding portfolio by 2007.
• MFI funding liabilities in 2007 for the following region are as follows: Latin America and Caribbean (greater that 70 percent), Eastern Europe and Central Asia (roughly 50 percent) and global level deposits provided as much total funding as borrowings (45 percent for each respectively)
• According to the author, non-deposit debt has two characteristics that elicit further investigation in the context of the 2005-2007 analysis: 1) more MFIs rely on borrowings than deposits to fund their portfolio because of the limited number and deposit taking MFIs, and 2) the regions with the strongest growth over the period relied heavily on non deposit financing.
• Cross-border debt has played an important role in funding growth over the period.
• Countries in Eastern Europe and Central Asia depend most heavily on foreign debt, amplified by the fact that non deposit financing represent 65 percent of total funding liabilities.
• Development finance institutions (DFI) have provided most of this debt (40 percent).
• Foreign DFIs offered MFIs debt with roughly five year maturities, versus the three and a half year terms for their local counterparts.
• South Asian MFIs and MFIs in MENA ended 2007 with large pools of debt raised from financial institutions (totaling 70 percent and 62 percent of funding liabilities, respectively).
• Borrowings in Nepal and India (such as Bangladesh) represented more than half of funding liabilities (75 percent of India)
By Zoran Stanisljevic
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