Microfinance Institutions
Introduction to Microfinance Institutions
The MIX Top 100 MFIs
Introduction to Microfinance Institutions
Although there are many different types of microfinance institutions, they are generally defined as organizations that provide financial services to the poor. Microfinance institutions (MFIs) may differ in their legal structure, mission, methodology, and the products and services they offer. One feature they all hold in common is the goal of meeting the banking needs of those who are too poor to fit the profile of traditional bank clients.
The first microfinance institutions (MFIs) were non-profit organisations with a social mission to alleviate poverty by helping the poor develop vocational and business management skills, and by giving them small, uncollateralised loans for working capital. From this modest yet revolutionary beginning in South Asia and Latin America in the 1970s, microfinance now encompasses 10,000 charitable organizations and regulated financial institutions across the globe which offer a burgeoning array of credit, savings, housing finance, remittance, and insurance products to the base of the pyramid.
The MFI landscape is complex, encompassing a broad range of legal structures, lending methodologies and product offerings. MFIs which are regulated, and therefore investable, comprise credit unions, co-operatives, other non-bank financial entities, microfinance banks, and commercial banks moving down-market. A major difference between these is ownership, which may consist of members, the government, socially-minded shareholders, or profit-seeking shareholders. The type of ownership is important because it often dictates the approach, priorities, and specific projects undertaken by an MFI.
MFIs are also commonly divided into those that are regulated and those that are not regulated. Regulated institutions meet an extensive set of requirements that allow them to offer financial services such as savings and insurance. Additionally, only regulated MFIs are considered ‘investable,’ or eligible to receive profit-seeking investments. Non-regulated MFIs are not monitored for compliance with these requirements, and are therefore legally unable to perform these functions. Some non-regulated MFIs choose to undergo the process of formalization, an increasingly strong trend which is reshaping the microfinance industry today.
IAMFI has included the reports of the MIX and Forbes top MFIs because they provide a good introduction to some of the major actors in the microfinance industry. The MFIs included in these rankings are the primary recipients of commercial funding. They have been chosen by Forbes and the MIX for their outreach, efficiency, transparency, risk, and return levels.
Representing just a fraction of the more than 10,000 institutions involved in microfinance, the scope of this section is extremely limited. Not only is the magnitude of the industry not captured here, but the diversity among MFIs is not illustrated either. The structure, strategy, products, management, ownership, and performance of an MFI depend on its geographic location, the nature of its target market, its specific mission, and a multitude of other factors which makes MFIs difficult to compare. For example, while the MIX awards the highest rankings to those MFIs with the widest outreach and lowest costs, an MFI reaching a smaller number of clients with larger costs may be considered successful if it is targeting a specific market that is difficult and therefore expensive to serve.
Most MFIs presented here are regulated. Only about 250 MFIs currently possess strong enough balance sheets to be eligible for investment. Financing is therefore concentrated in this top segment. In January 2009, Fitch Ratings released a report, Microfinance – Testing its Resilience to the Global Financial Crisis, corroborating the concentration of microfinance activity by estimating that the 100 largest MFIs represent 80% of sector assets.
IAMFI believes that the lack of absorptive capacity among MFIs is a major obstacle in the expansion of the microfinance industry. While these rankings show “Tier 1” MFIs, there are thousands of Tier 2, Tier 3 and greenfield MFIs in need of funding. In representing only the top tier MFIs IAMFI does not intend to advocate investment exclusively in this small segment of the industry. To the contrary IAMFI believes strongly that avenues for funding a broader group of MFIs must be created, and seeks to contribute to this effort by providing investors with the resources to make educated microfinance investment decisions.
More information about MFIs is available in the MFIs section of IAMFI’s Current Research page.
The 2009 MIX Global 100 MFI
For the third year running, the MIX Market has compiled a Composite Ranking of the performance of microfinance institutions based on information submitted by MFIs. The MIX Global 100 Composite Ranking allocates higher rankings to institutions with high outreach and low transaction costs, while maintaining profitability and transparency. After screening for the MFI are ranked according to three criteria. Outreach measures how MFIs expand access to financial services by examining the number of clients, growth, market penetration, and deposits mobilization. Efficiency measures the goal of reducing costs to clients by looking at cost per borrower, portfolio size, and portfolio quality. Finally, transparency measures the goal of publicly disseminating performance results in a standard, comparable manner. The full analysis and ranking, as well as the methodology, can be viewed here.
2009 TOP 100 MFIs (from MIX Market update Jan 2010)
| FONDEP | 100 | MENA | Morocco | MIX Page |
The MIX Composite Ranking includes a disclaimer, mentioning that this ranking does not evaluate the development impact of MFI, screening for MFI openness to foreign investment, or for the legality or practicality of cross-border investment in securities which they might issue. Thus, the Composite Ranking is not intended to be used as a tool for rating or
recommending MFIs.
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Forbes 50 Top MFIs 2007
Forbes' first list of the World's Top 50 Microfinance Institutions was chosen from a field of 641 micro-credit providers. The list was prepared by the Microfinance Information Exchange (www.themix.org) under the direction of Forbesmagazine (www.forbes.com). To qualify, the institutions must have made available their audited financials and must have passed review by a Forbespanel of advisers.
This table gives the rank (out of 641) for the top institutions according to scale, which is based on the size of their gross loan portfolio; efficiency, which considers operating expense and the cost per borrower as a percent of the gross national income per capita of their country of operation; risk, which looks at the quality of their loan portfolios, measured as the percent of the portfolio at risk greater than 30 days; and return, which is measured as a combination of return on equity and return on assets. Each category is equally weighted for an institution's overall ranking.
Click here to see Forbes article and learn more about Forbes ranking system
NAME |
RANK |
COUNTRY |
SCALE |
EFFICIENCY |
RISK |
RETURNS |
ASA |
1 |
Bangladesh |
14 |
83 |
56 |
40 |
Bandhan |
2 |
India |
108 |
49 |
42 |
1 |
Banco do Nordeste |
3 |
Brazil |
46 |
27 |
213 |
25 |
FMM Bucaramanga |
4 |
Colombia |
58 |
72 |
193 |
1 |
FONDEP |
5 |
Morocco |
119 |
26 |
196 |
1 |
Amhara |
6 |
Ethiopia |
56 |
126 |
118 |
42 |
Banco Compartamos |
7 |
Mexico |
15 |
24 |
295 |
11 |
Al Amana |
8 |
Morocco |
17 |
212 |
133 |
1 |
FMM Popayán |
9 |
Colombia |
53 |
181 |
141 |
1 |
Colombia – Cali |
10 |
Colombia |
27 |
206 |
155 |
4 |
Consumer Credit Union 'Economic Partnership' |
11 |
Russia |
82 |
300 |
19 |
1 |
FBPMC |
12 |
Morocco |
59 |
126 |
219 |
1 |
Microcredit Foundation of India |
13 |
India |
75 |
142 |
7 |
185 |
EKI |
14 |
Bosnia and Herzegovina |
66 |
102 |
242 |
1 |
Saadhana Microfin Society |
15 |
India |
263 |
79 |
73 |
1 |
Jagorani Chakra Foundation |
16 |
Bangladesh |
136 |
176 |
128 |
1 |
Grameen Bank |
17 |
Bangladesh |
8 |
280 |
100 |
62 |
Partner |
18 |
Bosnia and Herzegovina |
64 |
169 |
230 |
1 |
Grameen Koota |
19 |
India |
209 |
106 |
156 |
1 |
Caja Municipal Cusco |
20 |
Peru |
48 |
99 |
222 |
119 |
BRAC |
21 |
Bangladesh |
10 |
159 |
126 |
205 |
AgroInvest |
22 |
Serbia |
84 |
195 |
222 |
1 |
Caja Municipal Trujillo |
23 |
Peru |
20 |
163 |
220 |
101 |
Sharada |
23 |
India |
229 |
207 |
55 |
13 |
MIKROFIN |
24 |
Bosnia and Herzegovina |
60 |
240 |
205 |
1 |
Khan Bank |
25 |
Mongolia |
19 |
149 |
280 |
59 |
INECO Bank |
26 |
Armenia |
96 |
173 |
202 |
39 |
Fondation Zakoura |
27 |
Morocco |
51 |
268 |
194 |
1 |
Dakahlya |
28 |
Egypt |
200 |
215 |
102 |
1 |
Asmitha Microfin Ltd. |
29 |
India |
80 |
254 |
73 |
111 |
Credi Fe |
30 |
Ecuador |
28 |
252 |
206 |
34 |
Debit Credit and Savings Institution |
31 |
Ethiopia |
50 |
246 |
80 |
154 |
MI-BOSPO Tuzla |
32 |
Bosnia and Herzegovina |
128 |
120 |
283 |
1 |
Fundacion Para La Promocion y el Desarrollo |
33 |
Nicaragua |
173 |
89 |
171 |
100 |
Kashf |
34 |
Pakistan |
123 |
194 |
219 |
1 |
Shakti |
35 |
Bangladesh |
170 |
221 |
151 |
1 |
Enda |
36 |
Tunisia |
198 |
90 |
257 |
1 |
Kazakhstan Loan Fund |
37 |
Kazakhstan |
120 |
118 |
320 |
1 |
Integrated Development Foundation |
38 |
Bangladesh |
300 |
134 |
140 |
1 |
Sunrise |
39 |
Bosnia and Herzegovina |
114 |
103 |
341 |
17 |
FINCA – ECU |
40 |
Ecuador |
125 |
138 |
264 |
54 |
Caja Municipal Arequipa |
41 |
Peru |
23 |
126 |
220 |
215 |
Crédito l |
42 |
Bolivia |
135 |
152 |
298 |
1 |
BESA Fund |
43 |
Albania |
109 |
135 |
345 |
1 |
SKS |
44 |
India |
61 |
395 |
141 |
1 |
Development and Employment Fund |
45 |
Jordan |
83 |
388 |
135 |
1 |
Programas para la Mujer – Peru |
46 |
Peru |
292 |
82 |
242 |
1 |
Kreditimi Rural i Kosoves LLC |
47 |
Kosovo |
213 |
158 |
247 |
1 |
BURO |
48 |
Bangladesh |
137 |
207 |
186 |
91 |
Opportunity Bank A.D. Podgorica |
49 |
Serbia |
49 |
234 |
319 |
23 |
Sanasa Development Bank |
50 |
Sri Lanka |
86 |
206 |
93 |
241 |
Microfinance Networks
A microfinance network is commonly an umbrella organization for multiple microfinance institutions, providing an avenue for cooperation and support. Through these networks, network member MFIs can share ideas, experiences, and solutions common challenges. In addition, networks help facilitate the MFI’s funding and investing procedures by connecting their members with funders and investors. Many times, networks strengthen operational, technical, and financial capacity of MFIs by promoting MFI standards and best practices and training.
Some microfinance networks promote a particular methodology through technical assistance (such as ACCION or Women’s World Banking) and may have a partial or whole equity stake in their members and partners. Country and regional microfinance networks have an additional focus on advocating local microfinance policies and help members transform into regulated deposit-taking financial intermediaries. In these networks, members are partial owners themselves of the network and govern the network through seats on the Board of Directors.
In 2008, the Citi Network Strengthening Program was launched in collaboration with the SEEP Network. The mission of the three-year program is to increase the capacity and scale of the microfinance sector by strengthening the operational, technical, and financial capacity of twelve national and regional microfinance networks, addressing the challenges which the sector is facing and promoting growth and development in the sector.
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