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Over 30 cr Indians could do with microfinance
Despite high growth, only a tenth of the demand for micro-finance is being served.

Although microfinance institutions (MFIs) expanded their customer base in 2006 on an average by around 23 per cent, with the volume of their loans having risen sharply in recent years to $25 billion last year from around $4 bn in 2001, the microfinance industry is still unable to meet more than a fraction of today’s potential borrowers’ demand., a study by Deutsche Bank Research says.

While MFIs currently serve an estimated 100 million micro-borrowers, the total potential demand in terms of number of borrowers is roughly estimated at one billion, says the study that calls for an increasing involvement of private sector investors to scale up microfinance.

In geographic terms, the untapped demand is unevenly spread around the globe.

The largest fraction of poor people is located in India (310 million), Bangladesh (70 m), Indonesia (60 m), Nigeria (45 m) and Brazil (40 m).

Assuming that national poverty rates are related to the portion of the population that already has access to microfinance services, penetration rates for different countries can be computed.

While the penetration rate, thus, is the highest in Bangladesh at 35per cent where Nobel peace prize winner Muhammad Yunus popularized microfinance through his Grameen Bank , it is as low as 2 to 3 per cent in India, Brazil and Nigeria, i.e. in these countries only two to three persons out of a hundred are already served with microfinance, while 97 to 98 people  per 100 are potentially in need of it.

To meet demand fully over the long run, a total funding mix of debt, subordinated debt, equity, deposits and guarantees for MFIs of roughly $275 billion would be required of which only $25 billion has been deployed, says the study. That leaves a funding gap of $250 billion.

An increasing increasing involvement of private sector investors is, therefore, a key medium-term priority to scale up microfinance, the study by Deutsche Bank Research suggests.
Source :
The Hindustan Times
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