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As microfinance continues to grow in popularity, it is important that consumers understand the basics of this industry and what they can expect. Here are 21 essential facts about microfinance done right.
The “microfinance market size” is a statistic that is often overlooked. It’s important to know the size of this market, because it will help you understand how much money micro-financing can be worth.
Microfinance promotes economic development by offering modest loans to those who are unable to acquire traditional loans. Microfinance is utilized all across the globe, with some developing nations offering loans of less than $100. Microfinancing in the United States refers to loans of $50,000 or less.
The following 21 data provide a chance to learn more about microfinance and the people it helps.
1. There are over 10,000 microfinance institutions across the world.
Microfinance institutions aren’t banks; they’re non-profit organizations that cater to low-income people. They assist individuals who are most in need with credit and financial services. Microfinance institutions are in the thousands all over the globe.
2. Microfinance Institutions Disburse Over $120 Billion in Loans
Microfinance institutions globally service more than 140 million borrowers and have a total loan portfolio of $124 billion, according to the Microfinance Barometer. Microfinance lending portfolios have grown by at least 8% for three years prior to COVID-19.
3. South Asia is home to 60% of the world’s microfinance borrowers.
South Asia, the world’s biggest microfinance borrowing area by population serviced, with over 85 million microfinance borrowers. South Asia is also the world’s second-largest microfinance borrower, accounting for $36.8 billion, or approximately 30% of the worldwide business. Latin America is the biggest, with a market capitalization of about $48 billion.
4. Women account for 80% of all first-time microfinance borrowers.
Microfinancing’s goal is to provide modest loans and financial services to those who would otherwise be unable to get credit. Women are often disadvantaged as a result of poverty and societal standards. In order to promote economic development and gender equality, some microfinance lenders opt to concentrate solely on giving funding to women.
5. Prior to the pandemic, microfinance loans had a repayment rate of 98 percent.
Microfinance loans have always had a 98 percent payback rate. Since the outbreak of the COVID-19 pandemic, payback rates in certain developing nations, such as India, have fallen below 90%, resulting in a significant reduction in new microfinance lending in these regions.
6. Despite COVID-19, microfinance portfolios are growing slowly.
COVID-19 had a significant influence on microfinance, although it did not pose a danger to the business. Microfinance statistics from the Consultative Group to Assist the Poor (CGAP) reveals that loan portfolio growth in most regions of the globe is about 2%, indicating that people may still get money. However, as lenders concentrate on serving current borrowers’ financial requirements, the number of new borrowers has decreased.
7. Over 2 billion people are unable to access financial services.
Despite substantial attempts to offer funds via microfinance, more than 2 billion people in the world remain unbanked. Microfinance is available to just 20% of the world’s estimated three billion impoverished. Despite the fact that microfinance has increased significantly in recent decades, it still fails to reach the bulk of its target population.
More than 1.2 billion people, on the other hand, have access to mobile money accounts.
Individuals may use mobile money accounts (MMAs) to transmit money to each other or to buy products and services from companies that have been approved by an MMA provider. MMAs give extra protection by eliminating the need to hold money at home, reducing the likelihood of theft and increasing wealth. In 2020, the number of registered MMAs increased by 12.7 percent globally.
9. Mobile Money Accounts are used by more than three times as many Africans as traditional banks.
Only around a quarter of Ugandans have a traditional bank account. MMAs, on the other hand, are available to 42% of the population. MMAs helped approximately 200,000 Kenyan families escape severe poverty in the 2010s. Individuals in Africa are now able to transfer money swiftly and securely for the first time thanks to the usage of MMA services. Furthermore, MMA services let many people to store money safely, lowering the danger of theft.
10. In the developing world, the self-employed poor account for half of the labor force.
Despite the fact that they make up the majority of the workforce, entrepreneurs in developing countries are unable to secure funding from traditional financial institutions. Microfinance gives people access to money to help them expand their businesses, their own income, and the local economy.
11. By 2027, microfinance is expected to be worth $394.8 billion.
Despite the uncertainties surrounding the short-term effects of COVID-19 on global finance, predictions show that microfinance will continue to develop. Microfinance loans might reach $394 billion by 2027, according to one projection. Despite the fact that the pandemic has slowed the rise of new microfinance borrowers, some experts believe that as the globe recovers from COVID-19, the number of new borrowers obtaining microloans will increase.
12. Globally, the average microloan is less than $1,000.
The average microloan is $885 among the more than 140 million people who get microfinance assistance. Microloans may be as little as $100, although the average SBA 7(a) loan issued in the previous federal fiscal year was $501,216.
13. The global average interest rate for microcredit is 37%.
While the worldwide average is high, take in mind that microfinance helps high-risk groups as well as individuals who do not have access to conventional financing. Some individuals believe that the high interest rate is a concern since it puts borrowers in danger of not being able to repay their debts. In certain areas, fees might increase by as much as 70%.
14. Nearly half of all small business loan applications are denied.
Small enterprises in the United States that ask for loans of up to $25,000 often do not obtain the entire amount requested. 48 percent of those polled said they didn’t get all of the money they requested when they first applied.
15. The SBA approved $85 million in microloans in 2020.
Since 1992, the Small Business Administration has started providing microloans. It distributed $85 million in microloans to 5,890 persons in 2020. The average loan amount was $14,434 with a 6.5 percent interest rate. These microfinance statistics include SBA microloans during the last five years:
Loans from the Small Business Administration (SBA) from 2016 through 2020
Small Business Administration (SBA)
16. In 2020, 51.5 percent of SBA microloans went to minority-owned businesses.
Minority-owned or operated firms got 51.5 percent of SBA microloans in 2020, according to those who provided demographic information. Those loans accounted for 38.7% of the total amount available to be provided.
17. In 2020, 46.6 percent of SBA microloans went to women-owned businesses.
Women-owned or operated businesses received 46.6 percent of all SBA microloans issued in 2020, accounting for 38 percent of the total amount.
18. Working capital will account for 80% of SBA microloans by 2020.
SBA Microloans are often utilized for several purposes. Working capital (80.3 percent), equipment (20.5 percent), materials (12.0 percent), supplies (3.7 percent), and inventory were the most prevalent uses of SBA microloans in the previous fiscal year (0.3 percent ).
19. In 2021, small businesses will get $20 billion in microloans.
One of the most crucial figures for American entrepreneurs interested in microfinance in 2021 is that the Small Business Administration (SBA) has set aside $20 billion for disaster relief microloans, with intentions to distribute funding to 6 million small firms.
19. In the United States, 19% of microfinance loans went to rural borrowers.
Given that 80 percent of the population of the United States lives in cities, this number is unsurprising. In comparison to those in urban regions, the 60 million rural Americans who make up the remaining 20% of the US population got a comparable number of SBA microloans.
21. Rural borrowers received 65 percent of microfinance globally.
Unlike in the United States, where cities and suburbs received the bulk of SBA microloans, urban borrowers are in the minority worldwide. According to the Microfinance Barometer for 2019, the majority of beneficiaries came from rural communities throughout the globe.
Conclusion
Microfinance is a vital part of our global economy. It gives underserved areas access to funding and improves the economic well-being of the world’s poorest people. Microfinancing boosts the economy by enabling new firms to launch, assisting microbusinesses in growing, and altering the lives of people who receive finance.
The “microfinance industry” is a global industry that provides financial services to people who are not able to access traditional banking. The microfinance industry has been around for decades, and it has seen significant changes in recent years. According to the World Bank, there were over 1 billion people involved with microfinance at the end of 2017.
Related Tags
- microfinance data
- mfi growth
- microfinance by country
- global microfinance
- microfinance examples
