Profitability of LAC microfinance institutions decline

Microfinance Focus, Aug 20, 2010: The Latin American and the Caribbean region (LAC), which is home to some of the most evolved microfinance institutions (MFIs) in the world has reported an eroding profitability in the latest Benchmark published by Microfinance Information Exchange for 2009.

Although the region’s 343 MFIs who reported to MIX have accumulated a Gross Loan Portfolio of US$ 19.6 billion representing a 25.4% increase from 2008 and have increased loan disbursement by 10.9%, to 14.6 million borrowers, their overall financial performance has declined.

Profitability has decreased significantly as represented by a 100-point decline in Return on Assets (ROA) to 0.3% for the entire LAC Region, from 1.3% in 2008. Portfolio quality is also reported to have undergone deterioration with Portfolio at Risk over 30 days (PAR > 30) rising to 5% from 4% in 2008.

Comparing the Geographical Sub-regions of LAC, Central America registered losses in economies like Honduras and Nicaragua, while South American MFIs maintained positive returns in developed microfinance markets such as Peru and Bolivia.

MFIs who focused their attention on one single product (for example, only microenterprise lending) registered some losses compared to the general positive returns for MFIs with diversified loan products (e.g. microenterprise and consumption loans), says the report.

In 2009 Benchmark, 343 microfinance institutions (MFIs) reported figures for 2009 FYE, 3.3% (11) more MFIs than the previous year.

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