Microfinance - a Rigeional Comparison

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In 2015 the Gross microcredit portfolio increased by a rate of 50% due to the increasing number of borrowers as well as steady progression of borrowers to successive higher loan cycles. Deposit base has also showed steady growth though average deposit balances have dropped considerably (JCR-VIS Credit Rating Company Limited, 2016). Key indicators of the sector displaying growth over the last half decade are provided in table1

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Table 1 (JCR VIS, 2016)

Table2 provides the snapshot of the Mirofinance industry in Pakistan [pic 4]

Table 2 Snapshot of Microfinance industry Pakistan (Basharat, Arshad and Abbas, 2016)

This growth in active borrowers can be attributed to expansion policies of the MFBs and increasing awareness among the masses regarding MFBs.

This growth can also be attributed to decent performance of Pakistan’s economy. Pakistan’s economy grew by 4.2% during FY2015(the highest in last seven years). Moreover, major macroeconomic indicators like inflation, current account balance and fiscal balance also showed improvements (Basharat, Arshad and Abbas, 2017).

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Figure 1Discount Rate Trend Pakistan (Basharat, Arshad and Abbas, 2016)

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Figure2Breakup of Borrowers by sector (Basharat, Arshad and Abbas, 2016)

Figure2 shows the % of active borrowers by sectors. Most of the borrwings were made in trade followed by agriculture and livestock.

The overall structure of the industry can be termed as oligopolistic with the two main players occupying around 53% of the market share. Khushhali bank limited is the market leader having around 31% of the market share followed by Tameer (now Telenor) microfinance bank (JCR-VIS Credit Rating Company Limited, 2016).

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Figure 3Market share of MFIs in Pakistan (JCR VIS, 2016)

Table3 provide performance indicators of various institutions:

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Table 3Overview of MFIs in Pakistan (JCR VIS, 2016)

There are several microfinance products available in Pakistan which are mentioned in table4

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Table 4Microfinance products available in Pakistan Source: Author’s compilation

Bangladesh:

Bangladesh is one of the oldest homes to microfinance industry. It has been widely considered as birth place of microfinance industry hence also called “mecca of microfinance”. However, in view of the rapid growth of Indian microfinance industry its role as market leader is diluted (Sinha, 2011).

While it is one of the poorest countries in the world, Bangladesh has made significant progress in recent decades; achieving an 81% increase in its Human Development Index since 1980.

The Bangladeshi MFIs are currently in their maturity phase. The number of borrowers has increased to 34.36million (around 72% of poor population) while 28 million of them are active borrowers. The loan amount disbursed in 2011 is around 454 million taka (Ahmed, 2013). Table5 shows the outreach of Bangladeshi MFIs:

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Table 5 Outreach of Bangladeshi MFIs (Ahmed, 2013)

The MFIs in Bangladesh have a very well-diversified portfolio of products which is shown below:

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Table 6 Portfolio of microfinance products in Bangladesh (Ahmed, 2013)

Microcredit in Bangladesh is mostly used to finance non-farm activities followed by cattle rearing. Table7 shows the sector wise allocation of micro credit

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Table 7 Allocation of microcredit (Ahmed, 2013)

Based on recommendations made by National Steering Committee a separate Microcredit Regulatory Act 2006 was created and “Microcredit Regulatory Authority (MRA)” was established. This authority Is the formal regulatory and supervisory body of microfinance institutions in Bangladesh (Ahmed, 2013).

Out of all Bangladeshi MFIs Grameen bank holds a special place. Founded by Muhammad Yunus, this bank established Microfinance sector not only in Bangladesh but in South Asia and currently is the market leader in Bangladesh

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Figure 4 market share of MFIs in Bangladesh (Sinha, 2011)

Srilanka:

The microfinance sector of Srilanka is in its infancy period. As compared to other South Asian countries the % of poor population is quite low which is one of the main reasons of low development of microfinance sector in Srilanka.

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Figure 5 Poverty Headcount Index In Srilanka (Census and Statistics Bureau, 2014)

There are around 14000 financial institutions in Srilanka. Most of these are either financial NGOs or organizations that follow a local cooperative structure. For-profit formal sector microfinance institutions are less in number, and the market consists of five or six players that serve most of the low-income customer segment in the country (Nextbillion.net, 2016).

Sri Lanka has a different population distribution by income, with majority of its households in the low-income and middle-income segments rather than the lowest segment. The country’s 2.6 million low-income households are the target market for MFIs here (Nextbillion.net, 2016).

While market penetration data regarding microfinance institutions in Sri Lanka is not readily available, based on Intellecap’s analysis, the total number of customers served by the five largest MFIs/NBFCs is estimated to be around 1.3 million. Meanwhile, the number of customers served by 24 smaller MFIs is estimated to be nearly 0.7 million (Nextbillion.net, 2016).

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Figure 6 Income distribution in Srilanka (Intellecap,