The document summarizes microfinance as small loans provided to low-income individuals who lack access to traditional banking. It discusses the history and philosophy of microfinance, how it works through peer lending circles, and its growth centers globally. Key risks for microfinance investors include foreign exchange risk, difficulty assessing credit risk for many small borrowers, and potential volatility. The document also analyzes financial performance and growth metrics for microfinance institutions.
12. Regional distribution of MFIs Source: Microbanking Bulletin #18 Region Number of MFIs % of total Countries with the most in the region Africa 69 14% Ghana (13); Ethiopia (12) Asia 117 24% Philippines (37); India (32) ECA 98 20% Bosnia (13); Russia (11) LAC 179 37% Peru (37); Ecuador (20); Bolivia (17) MENA 24 5% Morocco (7); Egypt (6)
17. RISKS: the returns and risks vary depending on the investment vehicle, and the MFIs in which the fund invests. 1- Foreign Exchange Risk 2- Risk Assessment Problem 3- Default risk 4- Volatility
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21. Risks: Volatility The volatility of MFI returns are lower than commercial banks in those markets because MFI funds are invested in the informal sector, so they don’t take macro-economic shocks in those countries on the chin as the banks do
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26. Revenues Yield on gross portfolio, real (%) - Median Values 2005 2006 2007 All 23.6 23.0 22.2 Africa 22.6 22.2 21.5 Asia 18.3 19.5 18.5 ECA 23.1 21.9 19.6 LAC 26.3 25.2 25.1 MENA 25.5 23.3 25.5
27. Overall Financial Performance Return on assets (%) - Median Values 2005 2006 2007 All 1.0 1.6 1.5 Africa (1.2) (0.8) (0.6) Asia 0.9 1.2 0.6 ECA 1.4 1.7 1.1 LAC 1.5 2.3 2.1 MENA 2.6 2.4 2.0
28. Overall Financial Performance II Return on equity (%) - Median Values 2005 2006 2007 All 4.4 6.9 7.3 Africa (4.9) (1.5) (0.5) Asia 4.4 6.8 5.0 ECA 4.4 6.3 6.2 LAC 5.9 8.9 9.3 MENA 5.8 4.9 7.9
29. Loans outstanding Average outstanding balance (USD) - Median Values 2005 2006 2007 All 474 515 643 Africa 174 241 325 Asia 120 139 164 ECA 1,127 1,404 1,931 LAC 642 684 848 MENA 241 264 345
30. Risk and Liquidity Loan loss rate (%) - Median Values 2005 2006 2007 All 0.9 0.9 1.0 Africa 1.4 1.7 1.5 Asia 0.6 0.7 0.9 ECA 0.4 0.5 0.3 LAC 1.2 1.3 1.7 MENA 0.3 0.2 0.5
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32. Expansion of MFIs Total Assets (MM USD) - Median Values 2005 2006 2007 All 6.67 9.06 13.72 Africa 5.46 7.6 11.06 Asia 5.32 8.35 11.76 ECA 7.08 10.39 20.59 LAC 8.15 10.2 15.32 MENA 6.84 9.28 12.44
Presenter: Cagri Out of 487 MFIs surveyed in 2007 by the Microbanking Bulletin
Presenter: Either Erol or Carol
Yields much higher because of higher perceived risk of default - un-collateraliized Interest rates also high to cover transaction costs
As compared to a return on equity of 0% as of latest data in the US Savings and Loan industry
However, each individual loan very small as % of total loan portfolio. Also, very little correlated with each other and with the wider macro-economy.
Actual default rates are very low
Presenter: Carol
Presenter: Carol; Individuals registered with mobile payment system can get funds transferred to their account via a secure text message. The phone can also be used to make payments to merchants’ accounts in the same way.
- Hard for retail investors to access diversified funds - can be leveraged up to 2.5 times