2006 Asia Microfinance Analysis and Benchmarking Report - English

Microfinance institutions in Asia continue to dominate the global market, building on rapid growth and massive scale to capture a disproportionate share of microfinance clients worldwide. Overall, the region remains heavily credit-oriented, with savings often taking the form of compulsory deposits collected as a requirement for membership or access to loans. Te picture may soon change as increasingly more countries begin to open the door to voluntary savings mobilization, allowing institutions that meet certain criteria to provide this much needed service and potentially draw even more clients into the folds of microfinance. Many institutions, however, have yet to achieve the financial soundness and operational strength necessary to convince regulators of their ability to manage client savings. Leverage ratios are among the highest in the world, leaving institutions with rather tight equity bases to cover eventual losses. In the absence of a massive infusion of fresh equity capital, institutions will have to shore up their thin profit margins and build up their retained earnings. For some, the challenge will be to reduce costs, while for others the only option may be to raise prices.

The following pages explore performance patterns and trends across the Asian microfinance market on the basis of 2006 benchmark data from 194 institutions and 2005–06 panel results from a sub-set of 126 MFIs. Sector performance is further contextualized against global results from 704 institutions worldwide.