Global commercial banks double loans in microfinance

Mar 2008
Amsterdam, The Netherlands, March, 27 2008 - By the end of 2007, international banks’ total amount of outstanding wholesale loans to MicroFinance Institutions (MFI’s) has more than doubled from US$ 0.5 billion in 2006 to approximately US$ 1.4 billion. Notably, there was an increase in loans to African microfinance institutions.

This is shown in the recent update of the ING study ‘A Billion to Gain? - The Next Phase’, a perspective on large global financial institutions’ commitment to and involvement in microfinance. The report includes 17 of the world’s largest global commercial banks and insurers involved in the microfinance sector. All these financial institutions have entered the sector with a long-term perspective and with an increased focus on cost-effectiveness and profitability.

Since the end of 2006, when the last update of ‘A Billion to Gain’ was published, there has been a significant rise in local currency wholesale loans by global banks to the microfinance sector. In addition, global banks and the microfinance sector were concentrated mainly in India, Peru, Bolivia or Bangladesh. Nowadays, global banks are active in more regions, in particular Africa.

Although there has been a significant increase in microfinance loans to MFI’s, micro (life) insurance is slowly penetrating the market. Providing insurance to poor people in developing countries is still a huge challenge for the insurance industry. Furthermore, retail microfinance, such as individual micro loans and the provision of current accounts, is a relatively small part of banks’ total business activities.

ING will organize an international microfinance seminar on the 16 thof June 2008, to highlight this research study and to discuss the latest trends and the role of central banks regarding microfinance. The seminar will be attended by commercial banks, representatives from the international microfinance sector and will take place at ING Group’s head-office in Amsterdam.

Source : ING

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