Microfinance institutions : a regional performance analysis

Abstract

Eradicating extreme poverty is one of the eight Millennium Development Goals which the United Nations is projecting to accomplish by 2015. A solitary approach which renders this ambition more pragmatically attainable besides aiding in assuaging global indigence is the provision of financial services to the impoverished. Microfinance Institutions (MFIs) endeavour to assist the deprived in fleeing destitution with the definitive purpose of fracturing poverty cycles. Undeniably the focal clientele of MFIs comprises of low-income individuals residing in the vicinity of the poverty threshold, who typically are not eligible for traditional banking services. Correspondingly MFIs were probed owing to their magnitude to such exclusive category of the populace. In this paper the researcher extracted quantitative data from the MIX database (themix.org) and converged it to the CGAP technical guide (CGAP, 2009), with the intention of generating concrete inferences. More specifically the study inspected the performance of MFIs emanating from distinct developing regions besides utilising auxiliary peer groups. The dissertation essentially revolved around four prime indicators, explicitly Microfinance Outreach, Portfolio Quality, Financial Sustainability and organisational Efficiency. A meticulous weight was put on MFIs' efficacy in reaching the poor whilst ix simultaneously their financial health was vigorously scrutinised. Put diversely the research did not solely embrace MFIs' financial performance, but additionally social performance was appraised. The outcome of this critique should be of significance not merely to those attracted to sociology and concerned with public policy, but also to microfinance contributors who can potentially amplify benefits by allocating their resources proficiently. Indeed the researcher ultimately supplies a recommendation to both donors and investors where to preferably allot their donations and capital to generate the largest impact. Anticipating subsequent partitions the analysis apparently exposed Asian MFIs as the apex establishments in the microfinance industry appreciably outperforming their peers.