The Microfinance Business Model : Enduring Subsidy and Modest Profit
Recent evidence suggests only modest social and economic impacts of microfinance. Favorable cost-benefit ratios then depend on low costs. This paper uses proprietary data on 1,335 microfinance institutions between 2005 and 2009, jointly serving 80....
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World Bank, Washington, DC
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| Online Access: | http://documents.worldbank.org/curated/en/2016/08/26672277/microfinance-business-model-enduring-subsidy-modest-profit http://hdl.handle.net/10986/24867 |
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okr-10986-248672021-04-23T14:04:28Z The Microfinance Business Model : Enduring Subsidy and Modest Profit Cull, Robert Demirguc-Kunt, Asli Morduch, Jonathan microcredit microfinance implicit subsidy poverty cost-benefit analysis gender commercialization Recent evidence suggests only modest social and economic impacts of microfinance. Favorable cost-benefit ratios then depend on low costs. This paper uses proprietary data on 1,335 microfinance institutions between 2005 and 2009, jointly serving 80.1 million borrowers, to calculate the costs of microfinance and other elements of the microfinance business model. It calculates that on average, subsidies amounted to $132 per borrower, but the distribution is highly skewed. The median microfinance institution used subsidies at a rate of just $26 per borrower, and no subsidy was used by the institution at the 25th percentile. These data suggest that, for some institutions, even modest benefits could yield impressive cost-benefit ratios. At the same time, the data show that the subsidy is large for some institutions. Counter to expectations, the most heavily-subsidized group of borrowers is customers of the most commercialized institutions, with an average of $275 per borrower and a median of $93. Customers of nongovernmental organizations, which focus on the poorest customers and women, receive a far smaller subsidy: the median microfinance nongovernmental organization used subsidy at a rate of $23 per borrower, and subsidy for the nongovernmental organization at the 25th percentile was just $3 per borrower. 2016-08-10T16:15:59Z 2016-08-10T16:15:59Z 2016-08 Working Paper http://documents.worldbank.org/curated/en/2016/08/26672277/microfinance-business-model-enduring-subsidy-modest-profit http://hdl.handle.net/10986/24867 English en_US Policy Research Working Paper;No. 7786 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
microcredit microfinance implicit subsidy poverty cost-benefit analysis gender commercialization |
| spellingShingle |
microcredit microfinance implicit subsidy poverty cost-benefit analysis gender commercialization Cull, Robert Demirguc-Kunt, Asli Morduch, Jonathan The Microfinance Business Model : Enduring Subsidy and Modest Profit |
| relation |
Policy Research Working Paper;No. 7786 |
| description |
Recent evidence suggests only modest
social and economic impacts of microfinance. Favorable
cost-benefit ratios then depend on low costs. This paper
uses proprietary data on 1,335 microfinance institutions
between 2005 and 2009, jointly serving 80.1 million
borrowers, to calculate the costs of microfinance and other
elements of the microfinance business model. It calculates
that on average, subsidies amounted to $132 per borrower,
but the distribution is highly skewed. The median
microfinance institution used subsidies at a rate of just
$26 per borrower, and no subsidy was used by the institution
at the 25th percentile. These data suggest that, for some
institutions, even modest benefits could yield impressive
cost-benefit ratios. At the same time, the data show that
the subsidy is large for some institutions. Counter to
expectations, the most heavily-subsidized group of borrowers
is customers of the most commercialized institutions, with
an average of $275 per borrower and a median of $93.
Customers of nongovernmental organizations, which focus on
the poorest customers and women, receive a far smaller
subsidy: the median microfinance nongovernmental
organization used subsidy at a rate of $23 per borrower, and
subsidy for the nongovernmental organization at the 25th
percentile was just $3 per borrower. |
| format |
Working Paper |
| author |
Cull, Robert Demirguc-Kunt, Asli Morduch, Jonathan |
| author_facet |
Cull, Robert Demirguc-Kunt, Asli Morduch, Jonathan |
| author_sort |
Cull, Robert |
| title |
The Microfinance Business Model : Enduring Subsidy and Modest Profit |
| title_short |
The Microfinance Business Model : Enduring Subsidy and Modest Profit |
| title_full |
The Microfinance Business Model : Enduring Subsidy and Modest Profit |
| title_fullStr |
The Microfinance Business Model : Enduring Subsidy and Modest Profit |
| title_full_unstemmed |
The Microfinance Business Model : Enduring Subsidy and Modest Profit |
| title_sort |
microfinance business model : enduring subsidy and modest profit |
| publisher |
World Bank, Washington, DC |
| publishDate |
2016 |
| url |
http://documents.worldbank.org/curated/en/2016/08/26672277/microfinance-business-model-enduring-subsidy-modest-profit http://hdl.handle.net/10986/24867 |
| _version_ |
1764457863489519616 |