High Domestic Funding Saves Indian MFIs From Meltdown: Study

Oct 2009
New delhi, India, October, 18 2009 - Indian microfinance sector, the largest microfinance market in Asia, escaped the full impact of global meltdown due to low dependence on external funding and efficient microfinance institutions, a study said.

"Globally microfinance sector experienced shocks induced by the meltdown," said N Srinivasan, author of 'State of the Sector Report 2009', an annual study on microfinance brought out by Access Development Services, a not-for-profit company.

However, "South Asia had a high level of domestic funding in microfinance which seems to have significantly helped the sector to absorb shocks arising from the global meltdown," the author said in a statement.

While MFIs in several countries struggled to cover their operational costs such as in Pakistan, Bangladesh and Kenya, Indian MFIs with the lowest yield to gross portfolio manage to cover costs even on low average loan size, he said.

The microfinance industry witnessed rapid growth over the last few years and in the recent past, much of this growth was funded through savings deposits and increasing interest of the mainstream finance industry in microfinance.

"In a cross-regional comparison, investors rated Eastern Europe and Central Africa as well as Sub-Saharan Africa as high-risk markets, South Asia was rated as the least risky market for investments," Srinivasan said.


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