mercredi 29 février 2012

Over-indebtedness and investment in microfinance

Microfinance Focus, February 28, 2012: Microfinance rating agency MicroRate and Microfinance Information Exchange (MIX) have today co-published a study ‘The Tipping Point: Over-indebtedness and investment in microfinance’, which examines whether investments contributed to recent microfinance repayment crises, and whether measures of investment activity might serve as early warning signals for future microfinance crises.
The study which is a part of the MicroBanking Bulletin series claims that while ambitious microfinance institution (MFI) outreach goals are commendable, overly zealous loan origination practices can lead to less rigorous credit standards and destructive, unintended consequences.
While the best deterrent to over-indebtedness will come from improved credit reporting systems at the individual and institutional level, the data presented in this study suggests that early warnings for these problems can be found by tracking the supply of credit to MFIs.
Microfinance markets with the most lenders and most competition for MFI clients have seen the highest increases in risk, and likely, client over-indebtedness.
Exploring the origins of crises in Morocco, Nicaragua, Bosnia and Pakistan, the study shows that portfolio quality in these countries began to decline following rapid increases in funding. By 2007, portfolio-at-risk (PAR > 30) levels began to deteriorate, with delinquency rates rising from between 1 and 3 percent to 7 to 13 percent in just two years.
By 2010, local sources (primarily banks) provided the majority of funding - most notably in India. After peaking at 3.2 billion USD in 2009, investment funds represent the second largest source of debt funding, followed by Development Financial Institutions.
Further, the study shows that countries that had more lenders providing debt financing to MFIs in 2007 saw increasing risk over the next four years. These countries include India, Bosnia, Nicaragua, Morocco - that have seen crises or the threat of crises in recent times.
The study also reveals a considerable concentration of MIV (Microfinance Investment Vehicle) funding among the top MFIs. Fifty percent of total MIV funding (almost 5 billion USD) is concentrated in 33 MFIs. The top 100 MFIs receive seventy-five percent of the funding, while 90 percent of funding goes to the top 200 MFIs - the remaining 10 percent is allocated to an additional 400 MFIs around the world.
The complete study can be found here

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