Microfinance Banana Skins 2011: Losing its Fairy Dust

This report by the Centre for the Study of Financial Innovation (CSFI) discusses risk perceptions regarding the global microfinance industry.

The report describes risks facing the microfinance industry as perceived by an international sample of practitioners, investors, regulators and observers. It is based on a survey including 533 responses from 86 countries. Based on respondents perceptions, the report ranks 24 risks on severity and speed with which they are rising.

The report states that immediate risks posed by the global economic crisis have been replaced by larger concerns about the industry's future direction. Findings include:

• Credit risk is the biggest threat to microfinance;
• Concern regarding reputation risk and political interference has surged;
• Fears about liquidity, macro-economy, foreign exchange and interest rates have subsided;
• Risks may be global or local;
• Practitioners are concerned about bad debts;
• Investors are concerned about political interference and weak governance;
• Regulators perceive lack of transparency, internal controls and funding as threats;
• Asia focused on political issues while management concerns ranked high in Africa.