By Ralitsa Sapundzhieva and Olga Tomilova, published by the Microfinance Information Exchange Inc. (MIX), February 2009, 31 pages, available at:
http://www.themix.org/sites/default/files/2008%20Eastern%20Europe%20Cent…
A jointly produced report from the Microfinance Information Exchange Inc. (MIX) and Consultative Group to Assist the Poor (CGAP) provides an analysis of the microfinance sector for the Eastern Europe and Central Asia (ECA) region. The MFI sample is composed of 22 countries, total population of 366 million people and is divided into five sub-regions covering the local microfinance sector development. The paper explores the microfinance development and overview of key trends in the general level of policy environment, funding sources, external investments and performances of MFIs in the ECA region.
The current number of participating MFIs by sub-region, their number of active borrowers, total portfolio outstanding and average loan balance are as follows: Balkans (47 MFIs, 803,000 borrowers, loan portfolio USD 2.875 billion, avg. loan balance USD 3,581), Caucasus (164 MFIs, 394,000 borrowers, loan portfolio USD 1.042 billion, avg. loan balance USD 2,646), CEE (Central Eastern Europe: 3,852 MFIs, 5 million borrowers, loan portfolio USD 6.027 billion, avg. loan balance USD 1,179), Central Asia (1,245 MFIs, 843,000 borrowers, loan portfolio USD 2.646 billion, avg. loan balance USD 3,137), and Russia (1,893 MFIs, 675,000 borrowers, loan portfolio USD 2.702 billion, avg. loan balance USD 4,003).
In terms of general trends, there is a significant contrast between consolidation in more mature markets like the Balkans and younger markets of Russian and Central Asia. The average MFI in the Balkans (active borrowers) is seven times larger than in the Caucasus and 20 times larger than its Central Asian peers. Further analysis shows that the distribution of active borrowers by sub-region clearly illustrate that the CEE region accounts for 66 percent, due to the prevalence of credit unions (more than 82 percent of the total 7,200 surveyed). The remaining sub-region represents the following percentages: Balkans: 10 percent, Caucasus: 5 percent, Central Asia: 11 percent, and Russia: 9 percent. The distributions of institutions providing Microfinance by type are the following: government fund: 3.2 percent, credit union: 82.3 percent, non-depository NBFI: 11.4 percent, and NGOs: 2.1 percent.
According to the report, the microfinance sector in the ECA region is dominated by banks. Khan Bank and XacBank represent most of the MFI services in Mongolia while FINCA and ProCredit account for the remaining larger MFIs in the ECA region. An analysis of savings services in the ECA region show that over half are served by credit unions (CEE sub-region, representing 54 percent for the total sub-region). Central Asia’s distribution of savings mobilization is at 20.4% with the least number of savers in the Caucasus and Russia.
The report continues to provide microfinance funder activities in the ECA region through two types of analysis: 1) CGAP investor and donor funding data providing a breakdown of amounts committed to microfinance by sub-regions, types of funders, funding instruments and levels of the financial system. 2) MIX data on debt amounts received by the leading MFIs in the region with insight to the type, source, terms and conditions of these loan to MFIs. The results from the 54 leading donors and investors surveyed illustrated that CEE has the highest portion of both donations (45 percent) and investments (36 percent). Russia received the smallest share of 1 percent of the total funding allocated to the region while Central Asia and the Caucasus were almost equal in distribution. Debt was the most widely used funding instrument across the region (especially in the CEE) with equity and grants being a minor portion.
Funding trends for the ECA MFIs reporting to the MIX graphically illustrate that leverage has increased from 1.84 percent in 2005 to 3.24 in 2007 with commercial funding being more available. Operating costs for the ECA region decreased uniformly due to efficiency for most MFIs. MFIs in the Caucasus and Central Asia dramatically decreased their operating expenses with the Balkans decreasing at a slower rate since the “sector is beyond the point of reaping efficiency gains.” Margins for MFIs declined in most sub-regions with the exception of Central Asia, where margins increased significantly. By 2007, Central Asia MFIs had the highest margins in ECA. According to CGAP and the MIX, Central Asia MFIs were “able to channel most of the increased funding into their portfolio, which rose from 77 to 87 percent of total assets. The hike in returns did not stem from a change in interest rates.” The risk profile of ECA MFIs changed minimally, exhibiting a slight increase in PAR > 30 days in the Balkans, CEE and Russia while the Caucasus and Central Asia remained under 1 percent.
By Zoran Stanisljevic
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