Facts on MFIs
The MIX Market is an online public database that provides in-depth information on the outreach, efficiency, profitability, and portfolio quality of microfinance institutions (MFIs). Data is self-reported, but checked by analysts. The dataset is growing strongly and currently comprises around 1,200 MFIs all over the world.
Figure 1 provides an overview of selected MIX microfinance indicators for 2006 on a regional and a global level. According to these numbers, around 58m borrowers are currently being served through MFIs. Half of these are based in South Asia. In Sub-Saharan Africa only about 5m borrowers are served.
The efficiency of MFIs is measured in terms of operating expenses (salary and other administrative expenses) as a percentage of the average gross loan portfolio. The lower this figure is, the more efficient an MFI is considered to be. Efficiency is driven by a host of different factors, like average loan sizes, age of the institution, or communication and transportation infrastructure. The data in Figure 1 shows that this indicator typically lies around 20 to 30%, the exception being Africa, where operating costs account for 44% of the average loan portfolio.
Return on Assets (ROA) and Return on Equity (ROE) are the standard measures of profitability for MFIs. Medians and averages strongly diverge, indicating that some very unprofitable outliers distort the averages. For this reason, medians should be used as they deliver a more truthful picture of profitability. From Figure 1 can we see that the median ROA and ROE are positive throughout all regions, the exception again being Africa. A potential explanation lies in the fact that institutions have small borrower bases and extend very small loans, which tends to make operations inefficient.
Closely connected to this is the portfolio quality, which is either measured in terms of the portfolio at risk (loans whose repayments are delayed by at least 30 days) or the write-off ratio, both measured as a percentage of the average gross loan portfolio. As a rule of thumb, write-off ratios tend to be roughly half of portfolio at risk figures across all regions. Comparing the individual regions, Africa again exhibits the lowest portfolio quality, whereas Eastern Europe and Central Asian countries fare best.
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