How much microcredit is needed? Or, more precisely, how much money will it take to meet global or national demand for microloans to poor and low-income people? Although numerous attempts have been made to answer this question, it is difficult to come up with a reliable answer. The limited evidence available suggests that current estimates may be too high.
This Brief discusses the various issues that should be considered when estimating demand for microloans. Although numerous attempts have been made to answer this question, it is difficult to come up with a reliable answer. The limited evidence available suggests that current estimates may be too high. Data about microcredit usage in various countries are sketchy and not entirely consistent.
On balance, our suspicion is that most microcredit demand estimates are probably overstated, sometimes by wide margins. Such estimates should be treated with considerable caution, both by those who prepare them and by those who read them. Most microcredit demand estimates address the amount of funding required: the expected number of active borrowers is multiplied by an assumed average outstanding loan amount. Reasonable estimates of average loan size can be derived from international databases maintained by the MIX Market and Microcredit Summit. But estimating numbers of expected borrowers can be a minefield.