Microfinance surging.

• Author: Gardner, Gary
• Position: VITAL SIGNS

Microfinance--financial services such as loans, savings accounts, and insurance products designed to serve people with very low incomes--grew rapidly in 2006. The number of "microborrowers" worldwide increased by 17 percent in 2006 and averaged some 29 percent annually between 2001 and 2006. The global loan portfolio of the 340 microfinance institutions (MFIs) tracked by the Microfinance Information Exchange grew 34 percent in 2006.

The average microloan size worldwide is now US$1, 026 and the average savings account balance is $1,126. Globally, the loan write-off ratio was 3.1 percent in 2006, better than that of many commercial banks. Women account for 98 percent of borrowers in Asia and some two-thirds of clients in Africa, Latin America, and the Middle East. Asia leads the world in total current borrowers, with nearly 113 million, about 85 percent of the global total. Latin America reported the fastest growth in borrowers in 2006, at 53 percent.

The potential of microfinance to reduce poverty and succeed commercially has attracted growing amounts of foreign investment. Between 2004 and 2006, foreign capital investment in microfinance more than tripled globally to $4 billion, with most of the money going to 30 countries in Latin America and in Eastern Europe and Central Asia. Africa and Asia received only 6 and 7 percent respectively. Investment by development finance institutions--public monies from governments and intergovernmental organizations--accounted for $2.5 billion of the total in 2006. These institutions brought a commercial approach to microfinance, but they did so on flexible terms and with low interest rates that helped to build and strengthen the industry.

Selected Microfinance Indicators, by Region, 2006 Region Number of Gross Loan Average Loan Current Portfolio Balance per Borrowers (million Borrower (million) dollars) (dollars) Africa 8.4 1,371 516 Asia 112.7 6,971 371 Eastern Europe and Central Asia 3.4 4,636 2,424 Latin America and the Caribbean 6.8 9,668 1,148 Middle East and North Africa 1.7 64 631 North America and Western Europe 0.05 -- -- Note: Data on number of current borrowers...