Despite the crisis, the market for foreign funding in microfinance is expected to grow at 4 percent in 2012. The total market size of microfinance is estimated to be $80 billion globally. Foreign investors provide a share of $25 billion which makes them important both in terms of money and expertise.
The report provides insight into the unique contribution of Dutch funders in microfinance and came about in a partnership of ING, NpM and professor Lensink from the University of Groningen. Here are some of the main findings;
Impressive market share
The report highlights how the Dutch are unique in the sector. First, the Dutch contribution to the microfinance sector remains large, totalling $2,1 billion, giving them a market share of 8,4 percent. Among investors, the Dutch market share is an even more impressive 25 percent. Second, the members of the NpM are found to focus more on low-income countries compared to other foreign investors. Third, the NpM members invest directly in microfinance institutions more often than other foreign investors, allowing them to have more influence on their investments.
The report identifies five global trends. These are growth in direct lending, an expansion of services, the convergence of the formal and informal banking sector, adaptation of new technologies and an increased need for transparency. With their unique position of working closely with microfinance institutions (MFIs), the Dutch are currently in the driving seat while implementing initiatives to increase transparency and social performance. Considering these trends, the Dutch are now rethinking their future contributions to the sector by looking at opportunities for an increased focus on Africa, equity investments and SME financing.
Mark Cliffe, Chief Economist at ING, speaking at the event, argued that “the Dutch have a leading role in reinventing microfinance. Their expertise and leadership in transparency and responsibility sets an example for others to follow”. In the last few years microfinance has been hit both by the global financial crisis and criticisms of excessive emphasis on profits. With government budgets under pressure, he argued that “more emphasis will have to be placed on mobilising domestic savings to fulfil the industry’s goal of reaching the many hundreds of millions who remain financially excluded”.
Watch the video on the main findings of the ‘A Billion to Gain?’ report here.