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BULLETIN HIGHLIGHTS AND TABLESFigure 7: Financially Self-sufficient MFIs with the Smallest Loan SizesRanked by Depth IndicatorOrganization Region MethodologyScaleof Ops.Depth(%)Ranked by Average Loan BalanceOrganization Region MethodologyScaleof Ops.1. Compartamos LA Village Medium 3.3 1. EMT Asia Solidarity Medium 332. CEAPE/ PE LA Solidarity Medium 7.4 2. FINCA Malawi Africa Village Small 373. Pro Mujer Bolivia LA Village Medium 11.5 3. BRAC Asia Solidarity Large 534. WR Honduras LA Village Medium 11.5 4. BURO, Tangail Asia Solidarity Medium 575. FMM Popayán LA Individual Medium 12.0 5. ASA Asia Solidarity Large 666. EMT Asia Solidarity Medium 12.7 6. FINCA Nicaragua LA Village Medium 747. Enlace LA Solidarity Medium 12.8 7. WR Honduras LA Village Medium 858. Hublag Asia Solidarity Small 12.9 8. Pro Mujer Bolivia LA Village Medium 1169. RSPI Asia Solidarity Small 13.9 9. Compartamos LA Village Medium 12910. CMM Medellín LA Individual Medium 14.4 10. AKRSP Asia Village Medium 143Avg.LoanBal.(US$)How Low-end MFIs Achieve Financial SelfsufficiencyAn exploration of performance indicators by targetmarket reveals how the financially self-sufficientMFIs serving the poorest clients accomplished theirremarkable feat. Figure 8 shows that theadministrative expense ratio for low-end programsis approximately twice as high as that of MFIsserving other target markets. However, a look atthe salary structure and the cost per borrowerreveals that sustainable, low-end MFIs keep a lid onexpenses, so that their high administrative expenseratio is primarily a function of low loan sizes.Low-end(n=20)Broad(n=33)Figure 8: Efficiency Indicators of FSS MFIs byTarget Market aAverageSalary(multipleof GNP/capita)Cost perBorrower(US$)PortfolioYield (%)35.9 3.9 53 53.4 170AdminExp. /Avg.LP b (%)Productivityof Staff(No.)19.5 5.2 104 37.7 106High-end 16.3 9.1 294 29.5 55(n=6)a Data above were calculated by dropping top and bottompercentiles in each group.in average loan size and depth of outreach. Asshown in Figure 9, low-end MFIs have average loanbalances that are only 6 percent of those of highendprograms, and their depth indicator is only 4percent that of high-end programs, showing a muchhigher depth of outreach.Low-end FSS MFIs also target women moreeffectively than sustainable programs that providelarger loans. Eighty-three percent of the clients oflow-end FSS MFIs are women, compared to 50percent for broad MFIs and 32 percent for high-endinstitutions.Figure 9: Financial Performance of FSS MFIs byTarget Market aLow-end(n=20)Broad(n=33)High-end(n=6)Avg.LoanBalance(US$)Depth(%)OSS(%)FSS(%)AROA(%)164 14 129 106 1.6751 67 125 111 2.52,629 340 141 117 2.3aData above were calculated by dropping top and bottompercentiles in each group.Besides keeping costs down, to compensate fortheir small loan sizes, financially self-sufficient, lowendMFIs also charge much higher interest ratesand have higher productivity ratios. While thesecompensating efforts do not result in the samelevels of financial performance as MFIs servingbroad and high-end clientele (i.e., low-endprograms have slightly lower FSS and AROAratios), the results of the low-end FSS MFIs arequite extraordinary given the enormous disparities32 MICROBANKING BULLETIN, SEPTEMBER 2000
BULLETIN HIGHLIGHTS AND TABLESRegional Analysis of DepthSuccess in profitability serving the low-end marketvaries significantly by region. An analysis of theentire Bulletin database (not just the financially selfsufficientsubset), summarized in Figure 10,provides some indication of key regionaldifferences. The first finding is that there are notany participating MFIs from Eastern Europe thatserve the low-end market.In Latin America, participating low-end MFIsachieve almost the same levels of self-sufficiencyon average as institutions serving a broad market.This accomplishment appears to be largely theresult of a 19-point spread between portfolio yieldand the administrative expense ratio.On average, low-end MFIs in Africa are reallystruggling. Unlike other regions, the low-endinstitutions in Africa have higher costs per borrowerand a higher salary structure than MFIs serving abroad market. Although they try to make up fortheir high costs with increased productivity andhigher yields, the astronomical administrativeexpense ratio of 76 percent is too much to bear. Tobe fair, the low-end African institutions are thesmallest (average loan portfolio of US$1.1 million)of the subsets listed in Figure 10 and, except for theEastern European programs, have been inoperation for the least amount of time (average 4.3years).The low-end Asian MFIs are heterogeneous. Justover half are financially self-sufficient, includingsome that are very profitable. At the other extremeare programs that, despite low costs and highproductivity, are unprofitable primarily because theyare not generating a sufficient portfolio yield. Infact, only in Asia do the MFIs with the smallest loansizes charge the lowest interest rates.Change in Depth and FSS over TimeThe average age of sustainable, low-end MFIs is 11years, which is notably higher than the programsserving broad markets (8.6 years) and almost twicethe age of high-end programs (5.8 years). It isoften assumed that MFIs experience a gradualincrease in average loan size over time. But thefact that these MFIs are on average 11 years oldand are still serving the low-end market suggeststhat loan balances do not necessarily have to creepup as MFIs mature. Indeed, it is probable thatthese experienced MFIs become more adept inserving new clients who demand small loan sizesand hence maintain a small average loan balance.Figure 10: Performance Indicators by Region and Target Market aAverageLoanBalance(US$)Depth(%)FSS(%)PortfolioYield (%)AdminExpense/Avg. LoanPortfolio(%)Cost perBorrower(US$)AverageSalary(multipleof GNP/capita)Productivityof Staff(No.)Latin AmericaBroad (n=32) 956 63 103 40 22 141 4.9 100Low (n=19) 250 11 97 64 45 87 2.5 131Africa bBroad (n=8) 332 67 88 30 30 67 8.2 96Low (n=15) 125 21 63 49 76 72 9.0 153Asia cBroad (n=4) 258 40 109 39 16 37 3.6 147Low (n=15) 83 18 82 32 32 28 3.1 197Eastern EuropeHigh (n=6) 2,866 250 88 29 21 460 8.6 48Broad (n=8) 1,277 76 87 31 25 245 6.1 74a Data above were calculated by dropping top and bottom percentiles in each group.bAll MFIs in MENA are included in Africa.c All MFIs in CA are included in Asia.MICROBANKING BULLETIN, SEPTEMBER 2000 33
Page 1: THEMICROBANKINGBULLETINFocus: Reach
Page 5: CONTENTSFrom the Chair.............
Page 8: FINCA Uganda is one of the most mat
Page 13 and 14: FEATURE ARTICLESFigure 4: Compariso
Page 15 and 16: FEATURE ARTICLESA Business Model fo
Page 17 and 18: FEATURE ARTICLESBy redirecting fina
Page 19 and 20: COMMENTARYCOMMENTARYServing the Poo
Page 21 and 22: COMMENTARYDG: The most important ch
Page 23: COMMENTARYSix out of Seven Ain’t
Page 26 and 27: CASE STUDIESUntil mid-1997, FINCA U
Page 28 and 29: CASE STUDIEScredit training and qua
Page 30 and 31: CASE STUDIESFigure 2: Outreach of B
Page 32 and 33: CASE STUDIESproviding smaller loans
Page 34 and 35: CASE STUDIESThe large concentration
Page 36 and 37: BULLETIN HIGHLIGHTS AND TABLESmetho
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Page 45 and 46: BULLETIN HIGHLIGHTS AND TABLESIndex
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Page 62 and 63: APPENDICEScurrent year’s inflatio
Page 64 and 65: APPENDICESStatistical IssuesThe Bul
Page 66 and 67: APPENDICESACRONYM NAME, LOCATION DA

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