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The Microfinance Business Model : Enduring Subsidy and Modest Profit / Cull, Robert.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Cull, Robert.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Commercialization.
- Cost-Benefit Analysis.
- Gender.
- Implicit Subsidy.
- Microcredit.
- Nonprofit.
- Poverty.
- Local Subjects:
- Commercialization.
- Cost-Benefit Analysis.
- Gender.
- Implicit Subsidy.
- Microcredit.
- Nonprofit.
- Poverty.
- Physical Description:
- 1 online resource (63 pages)
- Other Title:
- Microfinance Business Model
- Place of Publication:
- Washington, D.C. : The World Bank, 2016.
- System Details:
- data file
- Summary:
- 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 USD 132 per borrower, but the distribution is highly skewed. The median microfinance institution used subsidies at a rate of just USD 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 USD 275 per borrower and a median of USD 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 USD 23 per borrower, and subsidy for the nongovernmental organization at the 25th percentile was just USD 3 per borrower.
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