The State of Microfinance in Central and Eastern Europe and the New Independent States
2003
Forster, Sarah | Greene, Seth | Pytkowska, Justyna
This report is based on the first empirical study of the microfinance industry in Central and Eastern Europe and the New Independent States (CEE and NIS). The main source of its findings is a survey of the region's microfinance institutions (MFIs) and funders conducted in 2001 by the Microfinance Centre for Central and Eastern Europe and the New Independent States, headquartered in Warsaw, Poland. The study achieved its four main goals: 1) the creation of an empirically based, comprehensive picture of the current state of the microfinance industry in the region; 2) a comparison of the performance of the region's main organizational models for microfinance delivery credit unions, nongovernmental organizations (NGOs), 'downscaling' commercial banks, and 'Greenfield' microfinance banks; 3) an analysis of the main barriers to growth and development confronting microfinance in the region specifically, access to finance and legal and regulatory constraints; and 4) a framework for action for the region's various microfinance actors, the goal being to increase the scale, outreach to the poor, financial viability, and impact of microfinance in the region. This study subscribes to the latter perspective. The data covers the broader range of clients and providers in the region. The alignment with those who see a broader target market for microfinance is primarily founded on a practical observation: the debate within microfinance appears to be moving in favor of this broader perspective. Second and third chapters provide background on the development of microfinance in the region. Second chapter describes the economic context in which microfinance is developing, focusing on the driving forces behind it. Third chapter explains the key features of the different MFI organizational models credit unions, nongovernmental MFIs, downscaling commercial banks, and Greenfield microfinance banks. The origin of each model, its key organizational features, and its target client markets are described. Fourth, fifth and sixth chapters present the study's findings. Fourth chapter looks at the industry's performance and current trends overall by MFI type and by sub region. Fifth chapter offers a more thorough analysis of the extent of poverty outreach by the region's MFIs. Sixth chapter assesses the MFIs' financial performance and the relationship between poverty outreach and financial sustainability. Seventh chapter examines the MFIs' access to funding, and eighth chapter discusses the region's legal and regulatory environment. These are the two factors identified by the MFIs themselves as the major barriers to microfinance development and growth in the region. Ninth chapter presents an outlook for microfinance over the next decade, followed by a series of recommendations aiming to improve this outlook. Not only does this chapter broadly suggest what needs to be done, but it also suggests how by proposing concrete actions that MFIs, policy makers, funders, and microfinance support organizations could consider as a means of implementing each recommendation.
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