2005 State of Microfinance Industry in Eastern Europe and Central Asia (ECA)

This report highlights the trends in outreach and competition in the microfinance sector in Eastern Europe and Central Asia (ECA) region in 2005.,The report states that:

• Downscaling commercial banks, microfinance banks and NGOs/Non Banking Financial Institutions (NBFIs) increased their outreach towards micro- and small entrepreneurs,
• Credit unions reached the largest number of clients,
• Credit unions provided the smallest loans, and downscaling commercial banks provided the largest,
• The trend of deepening outreach was especially high in Central and Eastern Europe (CEE), in the countries with higher per capita income and highest financial sector development,
• Funding sources were varied: while microfinance banks funded their growth from client deposits, NGOs/NBFIs increased their funding base through commercial borrowings,
• Financial performance of ECA MFIs remained favorable with all microfinance banks and almost all NGOs/NBFIs reported as operationally self-sufficient,
• Improvements in operational self-sufficiency were seen mostly among MFIs that managed to lower their operating expenses by improving staff productivity,
• The economic environment in the country of operations had great impact on MFI performance,
• Operating costs were higher in countries with lower levels of financial sector development.

Finally, the document reports that the 2005 trend showed that two-thirds of NGOs/NBFIs and microfinance banks decreased portfolio yields due to the competitive pressure from other NGOs/NBFIs or banks.