Microfinance Banana Skins 2012: The CSFI survey of microfinance risk

  • Date Posted: July 24, 2012
  • Authors: David Lascelle, Sam Mendelson
  • Organizations: Centre for the Study of Financial Innovation
  • Document Types: Evidence or Research
  • Donor Type: Foundation

The microfinance industry needs to adjust to rapid changes in its markets if it is to retain its relevance, according to the latest Microfinance Banana Skins. The report ranks the risk perceptions of more than 350 practitioners and close observers of the microfinance sector in 79 countries. Respondents expressed concern about the ability of microfinance providers to meet new pressures, particularly those relating to competition, governance, and managing new risks. Seven of the top ten risks identified by the survey relate to the ability of microfinance institutions to manage a sound and fast-growing business.

From the Preface, by Andrew Hilton (Director, CSFI):

Our last report (published in February 2011) was controversial, in that it exposed a concern that too many microfinance institutions were starting to look too much like conventional lenders – or so many people inside and outside the industry thought.


This year, our survey has identified another worrying trend – a widespread perception that the industry could well find itself facing the kind of bad debt problem that many conventional financial institutions have had to cope with in the last few years. The reason is simple: too many clients of too many MFIs have taken on too much debt. Hard figures are difficult to come by – and some observers of the industry believe that the worst of the problem is actually behind us. But the most striking result of this year’s survey is clearly the very high-risk ranking attached to over-indebtedness among MFI clients. Still, forewarned is forearmed – and, whatever progress has been made to date, the industry (and the donor institutions that support it) now has no excuse not to tackle the problem. It is also worth making the point that this problem is one of success – not of failure. It reflects the ubiquity of the microfinance model, and the way it has penetrated into those parts of the global credit market that others cannot reach. As the industry strives to retain its relevance in the face of big changes, this is one of its undoubted strengths.