Forbes, a American business and financial news magazine, presented the list of top 50 microfinance institutions (MFIs) of 2007 in its special feature on the private investment in the microfinance industry.
Matthew Swibel of the Forbes outlines the methodology of the rating and summarizes the results in Microfinance Fever. MIX Market, the microfinance information clearinghouse, compiled the list following the direction from the Forbes. MIX used its 2006 data and analysis from rating firms Micro-Credit Ratings International Limited and MicroRate. Six variables are considered: gross loan portfolio, operating expense, operating expenses divided by the average number of active borrowers as a percentage of gross national income per capita, the outstanding balance of loans overdue by more than 30 days as a percent of gross loan portfolio, return on assets and return on equity. There were four categories with equal weight for scoring: scale, efficiency, portfolio risk, and profitability. The combined average score of these categories determined the ranking of the institution. The analysis considered only those MFIs that have had audited financial statements for 2006, or for 2005 with the intention of providing 2006 results when available. The resulting pool comprises of 641 MFIs. The ranking attempts to measure financial performance, not the social benefits of the institutions.
The Top 50 MFIs are as follow:
1. ASA (Bangladesh)
2. Bandhan (Society and NBFC) (India)
3. Banco de Nordeste (Brazil)
4. Fundación Mundial de la Mujer Bucaramanga (Colombia)
5. FONDEP Micro-Crédit (Morocco)
6. Amhara Credit and Savings Institution (Ethiopia)
7. Banco Compartamos, S.A., Institución de Banca Múltiple (Mexico)
8. Association Al Amana for the Promotion of Micro-Enterprises Morocco (Morocco)
9. Fundación Mundo Mujer Popayán (Colombia)
10. Fundación WWB Colombia – Cali (Colombia)
11. Consumer Credit Union ‘Economic Partnership’ (Russia)
12. Fondation Banque Populaire pour le Micro-Credit (Morocco)
13. Microcredit Foundation of India (India)
14. EKI (Bosnia and Herzegovina)
15. Saadhana Microfin Society (India)
16. Jagorani Chakra Foundation (Bangladesh)
17. Grameen Bank (Bangladesh)
18. Partner (Bosnia and Herzegovina)
19. Grameen Koota (India)
20. Caja Municipal de Ahorro y Crédito de Cusco (Peru)
21. Bangladesh Rural Advancement Committee (Bangladesh)
22. AgroInvest (Serbia)
23. Caja Municipal de Ahorro y Crédito de Trujillo (Peru)
24. MIKRODIN Banja Luka (Bosnia and Herzegovina)
25. Khan Bank (Agricultural Bank of Mongolia LLP) (Mongolia)
26. INECO Bank (Armenia)
27. Fondation Zakoura (Morocco)
28. Dakahlya Businessmen’s Association for Community Development (Egypt)
29. Asmitha Microfin Ltd. (India)
30. Credi Fe Desarrollo Microempresarial S.A. (Ecuador)
31. Dedebit Credit and Savings Institution (Ethiopia)
32. MI-BOSPO Tuzia (Bosnia and Herzegovina)
33. Fundacion Para La Promocion y el Desarrollo (Nicaragua)
34. Kashf Foundation (Pakistan)
35. Shakti Foundation for Disadvantaged Women (Bangladesh)
36. enda inter-arabe (Tunisia)
37. Kazakhstan Loan Fund (Kazakhstan)
38. Integrated Development Foundation (Baghladesh)
39. Microcredit Organization Sunrise (Bosnia and Herzegovina)
40. FINCA – ECU (Ecuador)
41. Caja Municipal de Ahorro y Crédito de Arequipa (Peru)
42. Crédito con Educación Rural (Bolivia)
43. BESA Fund (Albania)
44. SKS Microfinance Private Limited (India)
45. Development and Employment Fund (Jordan)
46. Programas para la Mujer – Peru (Peru)
47. Kreditimi Rural i Kosoves LLC (formerly Rural Finance Project of Kosovo) (Kosovo)
48. BURO, formerly BURO Tangali (Bangladesh)
49. Opportunity Bank A.D. Podgorica (Serbia)
50. Sanasa Development Bank (Sri Lanka)
In addition to the ranking of MFIs, the feature includes three articles from industry experts on the latest trend of private sector investment in the industry.
In Profit and Poverty: Why It Matters, Michael Chu, a senior lecturer at Harvard Business School, explains why the entry of private capital into the microfinance industry and ensuing pursuit of profits by MFIs are crucial for the industry as an answer to the concern about motives of private microfinance investors. Chu identifies scale, permanence, continuous efficacy, and continuous efficiency as four basic conditions of successful poverty intervention. Chu asserts that microfinance will be able to deliver the four conditions when private capital participates and an industry arises as the result. Such birth of an industry requires economic activities and above-average returns. According to Chu, competition inherent in such industry will ensure that the growth of the industry benefits not only the investors, but also the clients of MFIs.
In The Changing Face of Microfinance Funding, Elizabeth Littlefield, CEO of the <a href=”http://www.cgap.org”>Consultative Group to Assist the Poor</a> and a director at the <a href=”http://www.worldbank.org”>World Bank</a>, asserts that traditional public agencies, such as development and international aid organizations, still play a critical role in microfinance despite the fast growth of private sector participation. They are the ones to support early-stage microfinance for the very poor before the market becomes mature enough to yield profit and to attract private investment. They also provide emerging financial institutions with subsidies, training and technical assistance. Additionally, assisting governments in creating laws and regulations to structure the market and protect the clients has long been a key role of public agencies like the World Bank. Littlefield concludes by reminding that microfinance should ultimately fund itself principally through local deposits and cooperation of private and public sector players is necessary to achieve the feat.
In Let Me In!, Ian Callaghan, the head of the Microfinance Institutions Group at <a href=”http://www.morganstanley.com”>Morgan Stanley</a>, observes why opportunities to own microfinance stakes are so scarce, making investing in microfinance so popular. Firstly, not enough information is currently available about channels through which to invest in MFIs. Secondly, there is almost no liquidity in microfinance investments. Motives of shareholders and investors and form of the ownerships of the MFIs vary across the industry, which complicates trade of microfinance stakes. Moreover, most MFIs start as nonprofit outfit seeded from donated funds and later convert to for-profit structure. As a result, it is often hard to value the assets of MFIs. For all these reasons, investing in MFIs in the current market asks for more prudence and proficiency of the market than traditional financial investment does.
Additional Resources:
Forbes: The World’s Top 50 Microfinance Institutions
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