|
Microfinance, or financial services for the poor, can be
profitable. The November 2001 issue of the MicroBanking Bulletin includes data from 62 self-sufficient
MFIs. The average return on assets for this group is 5.5%, which compares
favorably to commercial-bank returns. Indeed, there are grounds for hope that
microfinance can become attractive to mainstream retail bankers.
At the same time, some worry that an excessive concern for
profit in microfinance will lead MFIs away from poor clients to serve
better-off clients who want larger loans. It is true that programs serving very
poor clients are somewhat less profitable than those reaching better-off
clients, but this may say more about managers‚ objectives than an inherent
conflict between serving the very poor and profitability. MFIs serving the very
poor are showing rapid financial improvement.
Microfinance programs like Bangladesh Rural Advancement Committee and
ASA in Bangladesh have already demonstrated that very poor clients can be
reached profitably: both institutions had profits of more than 4% of assets in
2000.
There are cases where microfinance can not be made profitable,
for example, where potential clients are extremely poor and risk-averse or live
in remote areas with very low population density. In such settings,
microfinance may require continuing subsidies.
Whether microfinance is the best use of these subsidies will depend on
evidence about its impact on the lives of these clients.
David S. Gibbons and Jennifer Meehan, "The
Microcredit Summit's Challenge: Working toward Institutional Financial
Self-sufficiency while Maintaining a Commitment to Serving the Poorest Families"
(paper prepared for the Microcredit Summit Campaign 1999, updated 2000).
Joan Parker and Doug Pearce, CGAP Focus Note No. 20: Microfinance, Grants, and Non-financial
Responses to Poverty Reduction: Where
Does Microcredit Fit In?
(Washington, D.C.: CGAP, December 2002).
| 
