International Comparisons of Loan Balances per Borrower

Loan sizes are an important metric for microfinance, but how large are microfinance loans, really? Many analysts base their very definitions of microfinance on loan size. Publications such as this one use it to group and compare microfinance institutions. In the absence of detailed client surveys, the microfinance industry has typically looked to average loan balances as the best simple proxy measurement for depth of outreach to the poor. Yet, the measurement and comparison of loan balances across MFIs is potentially subject to several distortions. The main goal of this note is to compare the standard approach for comparing loan balances in different countries with two alternatives to investigate if these different methodologies yield different conclusions about microfinance depth of outreach globally.