Produced by Microfinance Information Exchange, Inc. (MIX) and Intellecap, March 2009, 20 pages, available at: http://www.themix.org/sites/default/files/2008%20Asia%20Microfinance%20Analysis%20and%20Benchmarking%20Report.pdf
The “Asia Microfinance Analysis and Benchmarking Report 2008” analyzes the evolution of the microfinance industry in South Asia and East Asia and the Pacific (EAP), with a focus on outreach and scale, funding sources, and financial performance in fiscal year (FY) 2007.
The report draws on data of 244 MFIs submitted for benchmarking analysis and data from a total 313 MFIs with published profiles on MIX Market, the microfinance information clearinghouse. The data cover 16 countries: Afghanistan, Bangladesh, India, Nepal, Pakistan and Sri Lanka from South Asia and Cambodia, China, East Timor, Indonesia, Laos, Papua New Guinea, Philippines, Samoa, Thailand and Vietnam from EAP. Overall, the report finds that the sampled Asian microfinance institutions (MFIs) served 47 million active borrowers with more than USD 10 billion in loans and over USD 7 billion in deposits in FY 2007.
The gross loan portfolio in Asia grew at more than 60 percent in FY 2007, compared with a global portfolio growth of 50 percent. Growth rates varied significantly by country, with Bangladesh, Nepal and Indonesia witnessing growth of less than half the regional average, while Cambodia and India saw rates topping 90 percent. While efficiency improvements slowed, MFIs in Asia served borrowers at the lowest cost level of any region globally, USD 37 per borrower.
The region was characterized by a high concentration of large MFIs. In fact, the top 10 MFIs in Asia accounted for 70 percent of borrowers served by the MIX sample pool of MFIs in 2007. Grameen Bank topped the list with 6.7 million active borrowers, followed closely by BRAC in Bangladesh with 6.3 million borrowers.
Despite the breadth of outreach attained by Asian MFIs, penetration of microlending varied significantly across the region. Penetration rates compare outstanding borrowers against a potential client base of the total population living below the poverty line. Bangladesh, Sri Lanka and Vietnam achieved significant depth at 35 percent, 29 percent and 25 percent respectively, but other countries lagged far behind. Because of India’s immense population, with 312 million people living below the defined poverty line, the penetration rate in India has remained at 3.5 percent despite the spectacular growth of the Indian microfinance market.
In terms of funding sources, Asian MFIs relied increasingly on commercial financing, through both commercial borrowings and equity investments, to fund portfolio growth. Commercial borrowings alone provided more than 75 percent of new loan funds in 2007, bringing total financing from commercial sources to nearly 50 percent in the region.
While most Asian MFIs maintained similar debt-led funding structures as their portfolios increased in 2007, institutions in countries such as Indonesia, the Philippines, and Sri Lanka – known for having strong deposit bases – relied heavily on retail deposits for funding. Some MFIs, notably in Afghanistan and Cambodia, continued to leverage further. The growth of regulated, for-profit models also attracted large pools of equity funding, with Indian MFIs taking in USD 100 million in new capital in 2007.
Overall, positive, stable returns and strong growth opportunities characterized MFIs in the region and helped them attract and retain new funding in 2007. A number of countries witnessed significantly improved returns on assets, including Afghanistan, Cambodia, India and the Philippines. Increasing leverage also boosted returns on equity for MFIs throughout Asia.
There were also several negative pressures on financial performance. The increased leverage in most MFIs drove up financing costs, as funding liabilities took on a greater portion of portfolio financing. In addition, rising delinquency in some markets brought down overall returns. Total arrears (balances over 30 days) and more persistent delinquency (balances over 90 days) doubled between 2006 and 2007, with portfolio at risk over 30 days increasing to nearly 3 percent for the median MFI in the region.
The “Asia Microfinance Analysis and Benchmarking Report 2008” concluded that the Asian microfinance market, with large underserved markets, new business models and innovative technologies, offers tremendous opportunity for investment in the expansion of existing and greenfield institutions. The report warns, however, that in 2007-2008, Asian MFIs will face the dual challenge of continuing growth in outreach amidst economic slowdowns and securing funding from financial markets in crisis.
By Jaclyn Berfond
Additional Resources:
Microfinance Information Exchange (MIX): 2008 Asia Microfinance Analysis and Benchmarking Report
MIX Market: Homepage
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