Is it the end of the growth in microfinance?
The first graph shows the growth of the micro-credit portfolio of our partners from 2007 to 2011. The total loan portfolio grew from EUR 40 million to EUR 98 million in just four years, an annual growth rate of 25%. In 2009, growth was just 5%, clearly showing the impact of the crisis. Since then growth has accelerated and reached 37% in 2011, almost back to 2008 levels.
If we look at the number of micro-entrepreneurs served, the second graph shows that the slowdown was both earlier (already in 2008 the number of clients decreased by 3%) and more pronounced compared to the micro-credit portfolio (annual growth of 8% versus 25% over the period). MFIs have recently started to reach out to more clients and 2011 saw an increase of 22% to 274,000 micro-entrepreneurs, but that still trails the micro-credit portfolio growth during the same period (amounting to 37%).
Both indicators together allow us to draw some tentative conclusions. During the crisis, MFIs appear to have concentrated on their best existing clients and invested less time and resources in finding new clients. This led to larger average loan sizes because existing clients tend to take larger loans over time, contributing to the observed growth in the loan portfolio. Inflation may also have played a role in increasing micro-credit portfolios in a number of countries.
As we emerge from this crisis, MFIs started to look actively for new clients as evidenced by the sharp increase in client numbers in 2011.
When times were difficult the microfinance institution focused on their most valuable assets, the relationship with the micro-entrepreneurs. The crisis also leaves a positive mark if it contributed to appropriate social performance measurement tools, proliferation of social ratings, acceptance of the client protections principles and other initiatives which help MFIs in staying close to their clients and social missions.
LMDF is optimistic regarding the growth perspectives of our partners. And here we do not refer to growth for the sake of growth but growth to reduce financial exclusion of micro-entrepreneurs.