Growth in Commercial Microfinance 2005-2008

This study illustrates changes in growth, expansion and maturity of the commercial microfinance industry between 2005 and 2008. The study quantifies growth in terms of industry equity, assets, number of borrowers and depositors.

The growth of the commercial microfinance industry has been particularly vibrant in Asia. Study findings indicate that:

• Higher levered regions are deleveraging versus lower levered regions as the industry matures;
• Greater financial intermediation is taking place;
• MFIs are using deposits as a way to fund their loans, especially in the African region;
• Concentration effects have clear impacts on competition and ultimately on the interest rates charged, particularly in high growth regions such as India and Africa;
• MFIs are managing their portfolio risk more efficiently;
• African MFIs are managing their risk better than Asian ones;
• Profit margin determined the greatest percentage of variability in return on equity between MFIs.

The study also presents an update on the ownership structure of characteristic MFIs. It presents evidence of acceleration in transformation, an increased willingness of local capital to fund MFIs, and a continued effort by NGOs to divest their original holdings.