When we use the local prime interest rate as the opportunity cost of capital, only about one-third of the institutions are economically profitable.Because the range in subsidy per dollar lent across types is narrow, while their average loan sizes vary widely (with more commercially oriented, for-profit institutions making substantially larger loans), subsidies per borrower tend to be relatively small for NGO microfinance institutions. /Filter /FlateDecode 346 0 obj /Linearized 1 >> Finally, because our calculations indicate that subsidy remains an important element of the current microfinance business model, they also underline the importance of pursuing new ways to change the cost structure faced by most microfinance institutions such as digital payments and mobile money.
>> /PageLabels 255 0 R endobj /Type /Catalog Still, most for-profits are subsidized. stream %���� 0000033754 00000 n Depending on their business model, these institutions target different types of borrowers, change the size of their loans and adjust their loan pricing. /S 1485
Not only do they make smaller loans (the proxy for lending to poorer borrowers in much of the literature and in our analysis), NGO microfinance institutions also lend substantially higher shares of their portfolios to women. 0000039698 00000 n "Microfinance:Credit Lending Models" is an attempt to document the various models currently being used by microfinance institutions throughout the world.
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0000033899 00000 n 0 0000003305 00000 n In addition, the paper provides evidence that dependence on subsidies declines but does not disappear as institutions become older, and in fact many older institutions continue to rely upon substantial subsidies. However, once we take account of the opportunity costs of the capital received by those institutions, a much smaller share of them is profitable in an economic sense. However, when we control for additional features of the institutions (age, size, region, cost structure, loan pricing) using regression models, none of the MFI types show a robust positive link between lending to women and subsidy per borrower. /Root 311 0 R And yet the industry has achieved impressive scale reaching 211 million customers globally in But are those higher interest rates enough to cover the costs of reaching harder-to-serve clients? Learn how the World Bank Group is helping countries with COVID-19 (coronavirus). The microfinance sector has room for pure for-profit microfinance institutions (MFIs), non-profit organizations, and “social” for-profit firms that aim to pursue a double bottom line. The limits of the model developed by Mohammed Yunus are not new to …
/O 312 310 37 0000004522 00000 n Figure 2 shows how the data on subsidy per unit lent lines up with the gender-orientation of institutions. We show that there is no single microfinance business model, but rather a number of models pursued by different types of institutions. 0000004325 00000 n 0000025680 00000 n 0000003024 00000 n xref >> 0000015463 00000 n To better understand how microfinance institutions target their customers and cover the costs associated with reaching them, we use proprietary data from 930 microfinance institutions that jointly served 80 million customers in 2009. Business models in microfinance. 0000039655 00000 n << /Metadata 257 0 R /OCProperties << /D << /Order [ ] /RBGroups [ ] >> /OCGs [ 343 0 R ] >> startxref << 0000025634 00000 n /T 1256575 /L 1262903
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