This report provides insight into the experience of financial services provider (FSP) clients, including quantitative comparisons of FSPs across regions and snapshots of FSP performance in Cambodia, Ecuador, India, Indonesia and Uganda.
The authors constructed the dataset from telephone surveys of 32,000 borrowers from 114 microfinance providers in 32 countries in Africa, Asia, Latin America and the Caribbean. Of these 114 FSPs, which serve 84 million people, about half are non-bank finance institutions; approximately a quarter are banks, credit unions or cooperatives; and about a tenth are NGOs. About one third of the FSPs offer only loans and not other services such as savings or insurance. Seventy-one percent offer non-financial services, such as training, free of charge.
Of the surveyed clients, 88 percent reported improvements to their quality of life, and 78 percent reported improvements in their financial situation as a result of their relationship with their FSP. One third reported using non-credit services such as education, savings or insurance, and there was a positive correlation between the use of these services and clients’ reported financial health. Another metric positively associated with clients’ financial situations was their length of relationship with their FSP. Those who had been with their FSPs longer were more likely to report improvements in both their financial situation and quality of life.
The authors argue that “FSPs continue to provide a unique, scarce product,” in that 58 percent of clients reported accessing a loan for the first time in the last year, and 54 percent reported having no quality alternative to their FSP.
Group borrowers were more likely than individual borrowers to report positive performance indicators, such as a better understanding of the financial products they are using, stronger resilience in face of unforeseen financial circumstances and a good relationship with FSP agents. Women are much more likely to be group borrowers – 60 percent of women in the sample borrow in groups versus 17 percent of men. At the same time, group lending showed signs of decline as clients’ capital needs increase and alternative FSPs become more accessible.
The authors warn that “client protection may not be as strong as we think.” Only 20 percent of clients said that their time spent worrying about finances had decreased since accessing services. Twenty-seven percent of clients reported that their loan repayment was burdensome, and 22 percent reduced their food consumption in order to make repayments. Reports of overindebtedness were particularly high in Latin America and the Caribbean, with 49 percent of clients in Ecuador reporting that their loan repayments were burdensome.
This is a summary of a paper by Sasha Dichter, Devin Olmack, Victor Thirma, Varsha Vadlamani and Avi Jain; published by 60 Decibels; October 2023; 63 pages; available at https://60decibels.com/insights/mfi-2023/.
By James Stevenson, Research Associate
Additional Resources
60 Decibels homepage
https://60decibels.com/
MicroCapital paper wrap-up on 60 Decibels Index, 2022
https://www.microcapital.org/microfinance-paper-wrap-up-60-decibels-microfinance-by-sasha-dichter-devin-olmack-ellie-rodgers-akanksha-singh/
MicroCapital article previewing 60 Decibels Index, 2023
https://www.microcapital.org/microcapital-brief-60-decibels-microfinance-index-data-from-32-countries-indicates-higher-confidence-among-group-borrowers-greatest-debt-burden-in-cambodia/
More paper wrap-ups from MicroCapital
https://www.microcapital.org/?s=paper
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