Downloading - Microfinance Information Exchange

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