Does Loan Type Matter for Microfinance Performance in Latin America?

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Oct 2009
Washington D.C., United States , October, 08 2009 - Does loan product mix affect the performance of a microfinance institution? “Consumption, Commercial or Mortgage Loans: Does it Matter for MFIs in Latin America?” a new research study from The Microfinance Information Exchange, Inc. (MIX) seeks to answer that question.

The paper uses data MIX collected on credit types from 322 MFIs throughout Mexico, Central and South America and the Caribbean. The research paper is available at www.themix.org, under Publications. The MFI product line data is available on MIX Market.

One of the most important findings of the paper is that when compared to microenterprise loans, higher shares of consumption loans are associated with higher yields, higher profitability, yet lower portfolio quality.

“This research is relevant for MFIs not just in Latin America but throughout the developing world as we see the industry diversify and offer a wider variety of products to a larger customer base,” stated Adrian Gonzalez, lead researcher for MIX and author of the paper. “Credit types offered by MFIs are taking many forms and are no longer specifically to finance a micro business. Through analysis such as this, we can better understand the trade-offs that accompany offering different product lines and the impact it may have on an MFI’s portfolio and performance.”

MIX collects, reviews and standardizes financial and social performance data on MFIs throughout the developing world, publishing the information on MIX Market. In 2006, MIX added to its data collection process in Latin America and the Caribbean product line details, including type of loan.

““We started collecting loan product data in Latin America because of the diversified credit product market in microfinance and the strong reporting infrastructure of the region. We have since expanded this process to all regions for the fiscal year 2008, and that data is now available on MIX Market. Anyone who visits MIX Market can now perform his own analysis of credit product within an MFI’s loan portfolio,” stated Blaine Stephens, COO and director of analysis for MIX. “We will be able to build on this initial research in the coming years to analyze trends in diversifying microfinance credit products in other regions of the globe.”

The Microfinance Information Exchange, Inc. (MIX) is the leading provider of business information and data services for the microfinance industry. Dedicated to strengthening the microfinance sector by promoting transparency, MIX provides detailed performance and financial information on microfinance institutions, investors, networks and service providers associated with the industry. MIX does this through a variety of publicly available platforms, including MIX Market (www.mixmarket.org) and the MicroBanking Bulletin. For more information, visit www.themix.org.



 

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