New Microfinance Study Shows Continued Growth In 2011
Hitting the ground running, the microfinance sector has pivotal plans for the New Year. A seminal study was recently released by responsAbility Social Investments AG, one of the world’s leading asset managers in the field of social investment.
Here are some of the key highlights of the report. . .
- Growth in 2011 will be moderate, yet persistent, serving as the first substantial growth year during the recession;
- Portfolio quality at microfinance institutions is gradually improving and normalizing at above average levels;
- The industry is on a more sustainable development path than its volatile high growth years in the past;
- Microfinance’s sustainable growth is a result of concerted efforts to improve corporate governance, risk management, and successful product diversification;
- Correlation is increasing between microfinance’s growth and international economies’ business cycles;
- And, leading investment managers will benefit as microfinance institutions require fewer, but more knowledgeable, versatile, and reliable refinancing sources.
These highlights come as excellent news. Simply put, 2011 presents some pretty exciting opportunities for the industry. Experts hypothesize that 2011 will be a key growth year because of solid portfolio growth and market penetration, due to product differentiation (micro-insurance, different loan options, etc) and an increased demand for microfinance.
By now, it is clear that microfinance has been generating considerable profits for participating shareholders. While there has been controversy surrounding the profit-maximizing behavior of microfinance institutions, most can agree on the unequivocal strides in sustainability that the industry is making. For example there are a number of important initiatives aimed at improving risk systems, like the Andhra Pradesh Microfinance Institutions Regulation of Money Lending Act that recently passed, curtailing the interest rates imposed on certain groups. The hope is that microfinance institutions continue to enhance their fiscal and social responsibility, which will not only guarantee effective financial performance, but also social performance, thereby assuaging the concerns of its critics.