The number of microfinance institutions (MFIs) making small loans to the developing world's poor has grown to over 7,000. With growth has come increasing competition for scarce funding. Few MFIs have reached self-sufficiency, and fewer still have made the transition to regulated financial institutions. Comparing the performance of MFIs that have attained self-sufficiency with those that have not and comparing both to regional commercial banks in developing countries on selected financial ratios reveals self-sufficient MFIs are strong performers on ROA and ROE. The majority of MFIs, however, are very weak and in need of continued subsidies. Providing financial services to the poor is an expensive proposition and may mean numerous MFIs will not reach self-sufficiency.
Michael Tucher is a Professor of Finance at Fairfield University's Dolan School of Business. He is also co-director of the Center for Microfinance Advising and Consulting (CMAC) at Fairfield University and Director of the Business Education, Simulation and Trading Classroom at Fairfield's Dolan School of Business.; Gerard Miles is finishing his law degree at Washington & Lee University.
Journal of Microfinance
Issue and Volume
BYU ScholarsArchive Citation
Tucker, Michael and Miles, Gerard
"Financial Performance of Microfinance Institutions: A Comparison to Performance of Regional Commercial Banks by Geographic Regions,"
Journal of Microfinance / ESR Review: Vol. 6
, Article 4.
Available at: http://scholarsarchive.byu.edu/esr/vol6/iss1/4