MFC Newsletter No.1/2006.pdf

At the end of 2004, the microfinance sector in Eastern Europe and Central Asia (ECA) totaled $4 billion, serving 3.2 million loan clients, with non-governmental organizations (NGOs) and non-bank financial institutions (NBFIs) accounting for 11% of the total loan portfolio and 14% of all active borrowers. NGOs and NBFIs provided services to 470,000 active borrowers with outstanding loans of $460 million and $540 million in total assets. The funding structure of these institutions was roughly equal between debt and equity, with subsidized debt prevailing, and commercial investors having a smaller share. Donor grants remained an important source of finance, with over $150 million provided in the form of capital grants. Retained profit also played a significant role in funding, with $77 million reinvested in assets. The industry expanded by 49% in 2004, with more than half of the growth going to Balkan MFIs. The use of different funding instruments varied, with about one-third of lending institutions using only donor equity funding, and the rest leveraging their equity with borrowed funds. As the sector matures, the number of institutions using borrowings in their funding structure has increased, with larger and older MFIs predominantly using borrowed funds, while smaller and newer ones relied on donor equity.