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Progress Under the
MFI Model
is funded by borrowings is uniformly high for large, medium and small MFIs (82, 86 and 78
percent respectively). Large MFIs are more efficient users of funds, with 81 percent of total
assets held as loans, as against 75 percent in the case of medium and small MFIs.
Table 3.2 Region-wise growth in outreach in 2003-04 and 2004-05
MFIs by
regional
distribution
No. of
MFIs
Outreach - FY
2005
Annual Growth
(%) in outreach
FY 2005
Annual Growth
(%) in outreach
FY 2004
East
18
332,476
61.12
32.68
West
2
6,738
31.40
42.15
North
3
91,317
11.34
19.50
South
45
1,710,323
67.50
51.73
Total
68
2,140,854
62.86
45.94
Source: Table 3 of Side-by-Side (Sa-Dhan 2005).
Table 3.2 which is based on outreach data from 68 MFIs for which three year data was available
from 2002-03 to 2004-05 (Table 3 of SBS) shows that the sample of 68 MFIs is growing fast,
at 63 percent overall in terms of outreach in 2004-05, up from 46 percent in 2003-04. Growth
is concentrated in 2 regions, the South and East, which already accounted for about 95
percent of membership as Table 3.2 shows. The growth rate was 31 percent in the West, on an
extremely small base, and only 11 percent in the North, on a higher base. 9 However like the
SBLP, the MFI model is trying to rectify regional skew, and the latest data will probably show
a higher rate of growth in the West and central India, coming partly from expansion of
existing MFIs from the South.
Second, there is a broad inverse relationship between growth and size, with young MFIs growing
faster than mature MFIs. According to the MIX report discussed below (MIX 2006), young
institutions grew the fastest, by 160 percent over the same two years, followed by new
institutions at 60 percent, and mature institutions by 53 percent. 10
SBS contains some interesting information on the dynamics of financial performance as MFIs
age and grow. It takes 5 to 10 years for an MFI to attain operational sustainability. 11 As for the
relationship of financial performance with size, Tables 3.3 provides a break up of performance
by size in terms of outreach, and GLP, separately. It will be seen that only when MFIs become
large with an outreach of 50,000 and GLP of Rs 20 crores do they become sustainable and
manage to bring delinquency under control. However, using the same size classification in
terms of GLP, but a smaller sample, the MIX report discussed below (MIX 2006) finds that even
medium MFIs are sustainable, and have positive returns on assets and on equity (Figure 5,
page 51, of the MIX report).
Growth is
concentrated in
2 regions, the
south and east,
which already
accounted for
about 95
percent of
membership
Interestingly, it appears from Table 3.3 that small MFIs are more efficient, with lower unit cost
ratios than medium sized MFIs, perhaps because they have higher productivity in terms of
number of active borrowers per credit office (small MFIs in terms of GLP have 88 percent more
51