microfinance institutions

A “microfinance institution” (MFI) means an organization that provides financial services targeting a clientele that is poorer and more vulnerable than traditional bank clients and is attempting to impact its clientele through improvements in their financial situation and more generally through improvements in their living standards, welfare and social capital.

Microfinance institutions vary in size and scope. They often start as small NGOs with credit activities being only a part of their focus, and eventually mature into full-fledged regulated banks. This typical life cycle gradually pushes them into full commercialization.

Today, there are a few dozen banks and financial institutions with balance sheets over 100 millions U.S. dollars, profitable and regulated; a few hundred microfinance organization with balance sheets over 5 million dollars, commercially sustainable and with higher growth rates (>30% per annum on average); and a few thousand micro-credit programs with balance sheets of less than 5 million dollars, largely donor driven.

In recent surveys, the number one growth impediment to microfinance institutions remained access to capital. Today their supply is generally sought to cover 10 to 15% of the potential demand.