South Asia

Donors and Investors Overview

South Asia counts some of the most dynamic microfinance markets such as India and Bangladesh as well as countries where microfinance is still at early stages. The funding landscape is no less diverse. As in most South Asian countries access to commercial foreign funding is difficult or impossible, and microfinance is to a large extent financed by local capital, such as loans from local commercial banks. In some countries, such as Bangladesh, client deposits are an important funding source for microfinance institutions.

Cross-border funding to South Asia is still predominantly provided by donors. According to the CGAP Microfinance Funder Survey, at least 38 international donors and investors actively support microfinance in the region. Their commitments was at $3.6 billion as of December 2008, only 15% of which is provided by public and private investors. Furthermore, the region attracts only a small portion of funding from Microfinance Investment Vehicles (MIVs). While 13% of the global microfinance loan portfolio is concentrated in South Asia, only 5% of MIVs’ asset under management are based in the region.

India receives by far the largest share of cross-border funding committed to the region and more than any other country in the world. Pakistan is also among the top receiving countries worldwide. Other countries in South Asia with high funder commitments are Bangladesh and Afghanistan. The largest funders in South Asia are the Asian Development Bank, the World Bank, KfW, IFAD and DFID, which together account for almost 80% of funding committed to the region.

With new local and international players entering the market and microfinance institutions growing at high rates, foreign donors have to continuously reconsider their role in microfinance in South Asia and reposition themselves according to market needs. Out of around $1 billion committed to capacity building of retail microfinance institutions globally South Asia receives around 27%, after Sub-Saharan Africa the largest share compared to other regions. Besides liquidity, corporate governance and management quality are seen as the biggest risks in the region according to the Microfinance Banana Skins 2009. Capacity building and strengthening the financial infrastructure are thus likely to remain among donors’ priorities.

Top Five Funders in SA

Source: 2009 CGAP Microfinance Survey