Some Features of Microfinance in Asia

“Asia is the most developed continent in the world in terms of volume of MFI (microfinance institution) activities.” This conclusion, drawn by Lapeneu and Zeller (2001:27), is based on an analysis of over 1,500 institutions from 85 developing countries. Comparing MFIs in Asia with those in Africa and Latin America, the study found that in the 1990s Asia accounted for the majority of MFIs, retained the highest volume of savings and credit, and served more members than any other continent.

This generalization of course covers up some wide disparities within the region. East Asia is particularly well served by MFIs. The largest number of members served and the largest distribution of loans and mobilization of savings in terms of GNP is found in Bangladesh, Indonesia, Thailand and Viet Nam. In contrast, the two most populated countries in Asia, India and the PRC, have very low outreach, despite a high concentration of the regions poor. Countries such as Afghanistan, Myanmar and Pakistan also have low outreach due to a variety of factors.

Despite these disparities within the region, overall it is said that MFIs have flourished in Asia and that compared to other regions they exhibit good outreach and high repayment rates.² Table 1 [ PDF: 114kb | 1 page ] below presents the most recent data from the Microbanking Bulletin, which gives only data on the limited number of MFIs who choose to report to the Bulletin. Those reporting to the Bulletin are thought to be amongst the best and are therefore unlikely to be representative (Meyer 2002: 14). Nonetheless amongst these, by various measures, Asian MFIs demonstrate relatively good outreach. They account for the largest number of borrowers (70% of which are women) and are second only to African MFIs in terms of number of voluntary savers. In terms of impact, size of loans and deposits are often taken as a simple indicator of impact on the poor. By these criteria, Asian MFIs have among the lowest Loan and Savings Balance per Borrower, even after adjusting for GNP per capita, suggesting that they are effectively reaching the poor.

1. An earlier helpful survey published by ADBI is Meyer (2002). This draws out some of the methodological problems in assessing impact and surveys a number of important studies available at the time of the writing (around 2001). Morduch (1999) is an extremely authoritative earlier survey focusing on both conceptual and empirical questions.
2. Lapenu and Zeller (2001:28) table 16.

The views expressed in this paper are the views of the author/s and do not necessarily reflect the views or policies of the Asian Development Bank Institute nor the Asian Development Bank. Names of countries or economies mentioned are chosen by the author/s, in the exercise of his/her/their academic freedom, and the Institute is in no way responsible for such usage.

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1. altafsamo
   (posted 27 March 2008 / 01:42:42 PM)
   
   I think micro finance if implemented in true spirit can do wonders but in countries like Pakistan the impact has not been so impressive although several studies has shown its positive impact. On the ground realities are very different and these need to be addressed by these multilateral donor agencies.
   Most of the loans are not properly utilized.
   Special emphasis is needed to be given on the capacity building of the prospective borrower. Let the borrower train to catch fish themselves by building capacity to utilize the borrowed amount for investment that will benefit them in long run. This will help decrease poverty.
2. muneeb seyal
   (posted 09 November 2007 / 08:42:14 PM)
   
   Well, I guess microfinance is doing a great work.
   Normally banks are not interested in providing funds to poor people.
   It's proved in history that poor are more honest than the rich.
3. Eric
   (posted 26 September 2007 / 10:35:57 PM)
   
   Whereas Micro finance holds the key to poverty education, it is not just the provision of the financial services that matters, information on where to invest and manage the business is equally needed.
4. Syed Shah
   (posted 22 April 2007 / 12:50:06 AM)
   
   Well I think micro finance can play a power full role in poverty alleviation, nature conservation and biodiversity conservation because it has the potential to diversify the source of income for the poor people and hence can result in reducing the pressure on exploitation of natural resources.