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BULLETIN HIGHLIGHTS
come sustainable. Here, the scope of this first
Trend Lines data set reveals its limitations. Given
the recent onset of microfinance in the former Soviet
states and Eastern Europe or the land mass
stretching from Morocco to Iraq, the average age of
institutions in these regions is already lower than
that of the rest of the sample, as evidenced by Figure
3. Moreover, many MFIs bound for sustainability
in regions such as Latin America or Asia— regions
with a longer institutional history in microfinance—
would have already achieved it before
1999, the first year in this data set. As a result, one
could reasonably argue that institutions in these
latter two regions that become sustainable during
the period are, by default, older than those in other
regions.
Despite the inherent weaknesses in the data set
when exploring how long the road is to sustainability,
the data do reveal another significant trend.
Younger institutions are becoming sustainable more
quickly than did their elder peers. While they show
a more volatile course towards sustainability and as
Figure 4 lays out, younger MFIs—those whose microfinance
operations began after 1995—have
reached sustainability in greater numbers more
quickly than institutions started in the 1980s or early
1990s. A comparison of these oldest and youngest
cohorts underscores this observation. Two-thirds of
MFIs founded prior to 1990 reach sustainability by
age thirteen. Among the youngest MFIs, the same
percentage achieves the same result by age four,
nine years earlier. While the exact timing requires
further research, as outlined above, MFIs are
clearly achieving sustainability earlier and at a
faster rate than before.
Figure 4: Younger MFIs reach sustainability
earlier
Founded Observation 1999 2000 2001 2002
% of MFIs that
1980s
64% 82% 86% 95%
are FSS*
(n = 22)
Average age 13 15 15 16
Early 1990s
(n = 24)
Late 1990s
(n = 14)
% of MFIs that
are FSS*
33% 42% 42% 63%
Average age 7 8 9 9
% of MFIs that
are FSS*
29% 21% 79% 64%
Average age 3 3 4 5
Source: MicroBanking Bulletin no. 10 data. *The percentage is
representative of sustainable MFIs in this age bracket as a percentage
of all MFIs in the same age bracket.
Towards sustainable outreach
The quickening pace of achieving sustainability is
not just noteworthy for those microfinance actors
who stress the importance of building sustainable
institutions. It is heartening for all those who believe
that the primary goal of financial systems development
is to increase access to financial services
for all those currently lacking it. As the Trend
Lines MFIs demonstrate and as Figure 5 depicts,
sustainable MFIs simply reach more clients, on average
and in total, than do unsustainable operations.
From beginning to end of the period, FSS
MFIs serve well over 90% of the clients covered in
this data set. This result proves robust even when
outliers— institutions serving more than one million
clients— are removed. Otherwise stated, the Trend
Lines MFIs indicate that sustainability holds the key
to the door of broad outreach.
Figure 5: Sustainable MFIs serve most clients
100%
80%
60%
40%
20%
0%
1999 2000 2001 2002
FSS Clients
FSS MFIs
Source: MicroBanking Bulletin no. 10 data.
Non FSS Clients
Non FSS MFIs
Sustainability also clearly proves its importance for
growth in client outreach. MFIs that became sustainable
averaged growth rates in borrowers over
one and half times those of institutions that were
not sustainable over the same period. More importantly,
periods where MFIs become sustainable do
not appear simply as bursts of growth; growth rates
continue into the years where MFIs have already
achieved sustainability. These growth rates combine
with the absolute client coverage portrayed in
the previous figure to suggest important implications
for sustainability in increasing access to microfinance
services. Even at healthy 20% average
growth rates, non sustainable MFIs extend their
services to under 3,000 additional clients per year.
Sustainable MFIs embrace nearly another 10,000.
Sustainability means more total coverage and more
new clients served every year.
Sustainable MFIs may pass the test of mass outreach,
but an important public policy concern is
whether or not they continue to reach the poor. Any
analysis in this area is currently beholden to relative
average loan balance (Average Balance per Borrower
/ GNI per capita) as a proxy for client income
levels. For all its simplicity and ease of capture, this
indicator suffers from numerous shortcomings dis-
26 MICROBANKING BULLETIN, MARCH 2005