MicroBanking Bulletin

Never has the issue of access to finance been higher on the agenda of international organisations and national government agencies. Never has there been such a flow of funding to microfinance organisations. And never has one witnessed such a string of initiatives in the access to finance field. At the same time, practitioners, donors and beneficiaries alike ignore an important player in the access to finance field: savings banks (including postal savings banks) and socially committed retail banks.

The Bulletin Tables are designed to present performance benchmarks against which managers and directors of microfinance institutions can compare their institution’s performance with that of similar institution. Since the microfinance industry consists of a range of institutions and operating environments, some with very different characteristics, an MFI should be compared to similar institutions for the reference points to be useful. The Bulletin Tables address this issue with a peer group framework.

There are many common measures for efficiency, either looking at cost per unit such as cost per borrower or cost per loan, or looking at cost per dollar lent: operating expenses over loan portfolio, personnel expenses over loan portfolio or over total administrative expenses. Often times, one of these measures is taken in isolation to identify whether or not an MFI is ‘efficient’.

The significant rise of the microfinance industry over the past 30 years has produced an ever-increasing number of microfinance institutions (MFIs) in the developing world. Over the past ten years the industry has been supported largely by development programs and social investors. The ongoing commercialization of the industry has attracted significant capital over recent years, as the Bulletin Highlights in this issue showcases, as well as those in the previous issue.