The Microfinance Business Model

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.

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Bibliographic Details
Main Authors: Cull, Robert, Demirguc-Kunt, Asli, Morduch, Jonathan
Format: Working Paper biblioteca
Language:English
en_US
Published: World Bank, Washington, DC 2016-08
Subjects:microcredit, microfinance, implicit subsidy, poverty, cost-benefit analysis, gender, commercialization,
Online Access:http://documents.worldbank.org/curated/en/2016/08/26672277/microfinance-business-model-enduring-subsidy-modest-profit
https://hdl.handle.net/10986/24867
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spelling dig-okr-10986248672024-08-07T19:52:31Z 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 Document de travail Documento de trabajo http://documents.worldbank.org/curated/en/2016/08/26672277/microfinance-business-model-enduring-subsidy-modest-profit https://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 application/pdf text/plain application/pdf World Bank, Washington, DC
institution Banco Mundial
collection DSpace
country Estados Unidos
countrycode US
component Bibliográfico
access En linea
databasecode dig-okr
tag biblioteca
region America del Norte
libraryname Biblioteca del Banco Mundial
language English
en_US
topic microcredit
microfinance
implicit subsidy
poverty
cost-benefit analysis
gender
commercialization
microcredit
microfinance
implicit subsidy
poverty
cost-benefit analysis
gender
commercialization
spellingShingle microcredit
microfinance
implicit subsidy
poverty
cost-benefit analysis
gender
commercialization
microcredit
microfinance
implicit subsidy
poverty
cost-benefit analysis
gender
commercialization
Cull, Robert
Demirguc-Kunt, Asli
Morduch, Jonathan
The Microfinance Business Model
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
topic_facet microcredit
microfinance
implicit subsidy
poverty
cost-benefit analysis
gender
commercialization
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
title_short The Microfinance Business Model
title_full The Microfinance Business Model
title_fullStr The Microfinance Business Model
title_full_unstemmed The Microfinance Business Model
title_sort microfinance business model
publisher World Bank, Washington, DC
publishDate 2016-08
url http://documents.worldbank.org/curated/en/2016/08/26672277/microfinance-business-model-enduring-subsidy-modest-profit
https://hdl.handle.net/10986/24867
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