Cross-border Funding of Microfinance

April, 2011     Mayada El-Zoghbi, Barbara Gahwiler, and Kate Lauer

As of December 2009, cross-border funders reported commitments to microfinance of US$21.3 billion, reflecting a 17% increase (US$3 billion) over 2008 commitments. Although this rate of increase is lower than the prior year's 30% growth rate, cross-border funding is expected to continue growing. Of cross-border funders, public funders provide a larger share of commitments, but private funders are increasing their commitments at a higher rate, with 2009 commitments one-third higher than 2008 commitments. In some markets, cross-border funding represents the lion's share of microfinance institutions' funding base. Yet, where institutions can mobilize deposits and where local capital markets exist, cross-border flows are likely to represent a small part of the picture.

This Focus Note draws on data from CGAP's annual surveys on cross-border funding (2009, 2010) to provide an overview of the microfinance funding landscape and trends in cross-border funding.

The US$21.3 billion in commitments to microfinance includes funding from more than 61 funders and 90 microfinance investment intermediaries that reported to the CGAP survey. Funders' commitments represent all active investments and projects supporting microfinance. As the typical project length is around three to five years, commitments include funds already disbursed as well as funds not yet disbursed. While commitments do not tell us how much funding reaches the microfinance sector within a given year, it is currently the most reliable indicator available for analyzing overall trends in microfinance funding.