Downloading - Microfinance Information Exchange
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BULLETIN HIGHLIGHTS<br />
perspective, this information can help donors make<br />
more informed investment decisions and formulate<br />
realistic expectations as they evaluate their partner<br />
institutions’ sustainability. The same holds true for<br />
private investors. As support institutions, networks<br />
and technical service providers can begin to place<br />
their affiliate and partner institutions on a spectrum<br />
of sustainable growth. The institutions themselves,<br />
as they plan for self-sufficiency, can build strategies<br />
that learn from the road already traveled by their<br />
predecessors and peers.<br />
This first Trend Lines data set offers a glimpse at<br />
the answer to this question, but presents certain<br />
limitations. The small sample size (60) and the limited<br />
number of institutions that achieved financial<br />
self-sufficiency over the period (17) mean that the<br />
answers may not yet prove robust. Moreover, the<br />
narrow window (1999-2002) limits the scope of<br />
study for this time sensitive question. Interpretations<br />
of ‘time to sustainability’ are limited to institutions<br />
that break through the 100% financial selfsufficiency<br />
barrier over the period, without knowledge<br />
of those that might have done so before or will<br />
do so after. A true answer to this question will<br />
eventually require data from inception, on a broad<br />
range of institutions, and over a long time horizon.<br />
Yet, analysis of this data set already yields some<br />
striking results.<br />
On average, the 17 Trend Lines MFIs that became<br />
sustainable during this period took eight years to<br />
cover full, adjusted costs. Not surprisingly, this<br />
number does not fall too far from the oft quoted ‘five<br />
to seven’ years to sustainability. In fact, as Figure 2<br />
illustrates, the median age of seven years better<br />
represents the norm for these institutions. In other<br />
words, half of all MFIs that became sustainable<br />
over the period did so by the age of seven. Quick<br />
observation points out that these MFIs fall into two<br />
distinct groups: a significant number (8) reach selfsufficiency<br />
in three to five years, while the rest<br />
cover all costs between seven and 11 years of age.<br />
4<br />
3<br />
2<br />
1<br />
0<br />
Figure 2: Average age at sustainability<br />
1 3 5 7 9 11 13 15 17 19<br />
Source: MicroBanking Bulletin no. 10 data. Data represent 17<br />
MFIs that became sustainable over the period 1999-2002.<br />
From many angles, the data yield few insights into<br />
how certain factors might impact an institution’s expected<br />
course towards sustainability. This holds for<br />
charter type, profit status, level of financial intermediation.<br />
Indeed, where the results do seem exceptional—<br />
a mere three years for banks or more than<br />
a decade for institutions mobilizing significant deposits—<br />
they are more likely the product of a single<br />
outlier. In these instances, the small sample size<br />
does not allow for a refinement of the eight year<br />
average.<br />
Figure 3: Average age at sustainability by<br />
characteristic<br />
Characteristics<br />
Nb<br />
of<br />
MFIs<br />
Avg.<br />
age at<br />
FSS<br />
Avg. Yearly<br />
Growth in<br />
FSS<br />
Avg. age<br />
over the<br />
period<br />
Total n = 17<br />
Charter Type<br />
Bank 1 3 9.9% 4<br />
Credit Union 1 5 3.0% 5<br />
NGO 10 9 25.9% 8<br />
NBFI 5 9 15.2% 9<br />
(FI)<br />
High FI 1 11 3.5% 12<br />
Low FI 2 12 21.7% 9<br />
Non FI 14 8 23.2% 7<br />
Methodology<br />
Individual 1 3 4.4% 3<br />
Individual/Solidarity 9 8 21.3% 8<br />
Solidarity 4 8 21.8% 8<br />
Village Banking 3 12 25.2% 12<br />
Outreach<br />
Small 7 6 26.4% 5<br />
Medium 5 11 22.8% 10<br />
Large 5 9 11.4% 10<br />
Profit Status<br />
Non-profit 13 8 22.6% 7<br />
Profit 4 9 13.5% 11<br />
Region<br />
Africa 3 6 32.5% 5<br />
Asia 3 14 9.3% 14<br />
ECA 6 4 23.1% 4<br />
LAC 3 15 13.3% 14<br />
MENA 2 6 24.7% 5<br />
Scale<br />
Small 4 8 28.4% 6<br />
Medium 13 8 18.7% 9<br />
Target Market<br />
Low 9 10 18.3% 9<br />
Broad 8 7 23.4% 6<br />
Source: MicroBanking Bulletin no. 10 data. Data represent 17<br />
MFIs that became sustainable over the period 1999-2002. This<br />
table does not present breakouts by Age or Sustainability because<br />
of redundancy with the observations presented (age to<br />
sustainability). For more information on peer groups, refer to<br />
pages 59 to 66 of this Bulletin.<br />
A casual observer might point out one striking, but<br />
deceptive, result from the following figure. Age at<br />
sustainability seems to vary greatly by region.<br />
Asian and Latin American MFIs would seem to require<br />
nearly three times the number of years to be-<br />
MICROBANKING BULLETIN, MARCH 2005 25