Consumption, Commercial or Mortgage Loans: Does it Matter for MFIs in Latin America?
This paper explores the impact of different combinations of loan products on MFIs' performance levels.Using data on the diverse Latin America and Caribbean (LAC) microfinance market, the analysis shows that product composition matters for MFI performance, not only from the financial perspective, but also that of average balances and outreach. The report analyzes credit type data for 322 MFIs during the period 2006-2008, and states that:
- Microenterprise lending is still the most important activity for most MFIs;
- Unweighted shares of product lines are stable, but some large licensed MFIs and cooperatives are downscaling;
- NGOs are the least diversified MFIs;
- Shares of product types are very stable;
- MFIs have been able to diversify their credit portfolios without giving up on their portfolio quality.
The results illustrate important trade-offs faced by MFIs when deciding on the combination of credit types. The paper states that the structure of the LAC microcredit market is very stable, with the exception of some large licensed MFIs and cooperatives that are downscaling by increasing their involvement in microcredit loans.
