Benchmarking African Microfinance 2005

This report, while analyzing performance of 71 Africa MFIs across 23 countries, also explores microfinance in a region where financial intermediation is used. The paper begins with highlighting some of the main constraints that African microfinance sector faces:

• Deposit mobilization has expanded two-fold between 2004-05 as compared to credit mobilization;
• Operating costs are high;
• Macroeconomic conditions are unfavorable;
• Competition is increasing;
• Access to commercial funds is limited.

The report further analyzes MFIs based on the following parameters:

• Scale and outreach - Deposit mobilization forms an integral part of the any outreach and financial performance analyses of MFIs in this region;
• Financing structure - Two distinct funding strategies predominate: local debt financing and equity financing in the form of donation;
• Profitability, efficiency and productivity - High inflation levels in the region, associated with high financial expenses and prices, push MFIs to charge high interest rates so as to maintain their capital base;
• Portfolio quality - MFIs are finding it difficult to maintain their important assets, high delinquent loans due to poor credit culture.

The report uses a number of peer/similar groups for a holistic understanding and presents a practical analyses of MFIs. The document concludes by emphasizing that:

• Despite unfavorable environment, MFIs in this region continue to serve the marginalized section of the society;
• There is immense scope for improvement so as to have positive impact on the overall microfinance sector.