The global microfinance market is anticipated to witness steady growth over the forecast period (2017 to 2025). This growth can be attributed to rapid rise in number of small and medium enterprises (SMEs). Government initiatives to improve credit lines of people from lower income groups is projected to further fuel growth. Lower interest rates compared to other finance options are likely to positively influence adoption of these services. Rise in efforts to provide high quality financial services to socially marginalized people is also one of the key driving factors. Better risk management practices with rise in supply chain activities of microinsurance companies can also create growth opportunities in future.
Along with financial products, microfinance also offers options such as fund transfers, payments, insurance, and savings. Crucial role of microenterprises in economic development is projected to propel market expansion. Microfinance institutes have evolved from conventional non-governmental organizations (NGOs) to specialized banks. To put this in perspective, some NGOs and non-profit institutions are transforming into profit-seeking institutions to gain market reach and sustainability. Citi Finance and GE Finance, among other consumer finance companies, are joining them. Consumer retailers are emerging as consumer lenders. Examples of such lenders include Tesco and Wal-Mart. Such activities are anticipated to create collaboration and expansion avenues in the market.
Technological advancements such as rising adoption of automated portfolio monitoring solutions to gather more information about client credit flow can further drive the market for microfinance. Factors such as challenges in credit assessment may hinder this growth to an extent in the forthcoming years. Having said that, rising globalization and its positive impact on microfinance institutions has opened new avenues for them in the form of partnerships, foreign investments, strategic alliances, and global trade. All these factors are anticipated to bode well for market growth. Rise in initiatives to spread awareness regarding advantages of these institutions, coupled with efforts to empower marginalized population, may further create business opportunities in the forthcoming years.
Banks and non-banks are some of the major types of institutions active in microfinancing. The banks segment is projected to remain steady in future. Low interest rates are anticipated to bode well for the growth of banking institutes in the coming years. However, reluctance of banks in providing funds to SMEs is anticipated to boost the non-banking sector. Focus on non-bank financial resources such as mutual funds can also drive the expansion of this segment in future. Some of the significant end-use sectors are household finance, agriculture, services, and manufacturing. The services sector is likely to witness significant rise in terms of loans granted. Agriculture and household sectors are also anticipated to witness substantial growth in the forthcoming years.
Asia Pacific, North America, Europe, and Middle East and Africa are the major regional markets for microfinance. Asia Pacific is projected to remain one of the leading regions over the forecast period, driven by impressive growth in countries such as India. It is poised to hold a significant market share and witness healthy expansion in terms of CAGR. Demand from countries such as China, Japan, South Korea, and Taiwan is projected to give the region a major fillip. Rapid industrialization, consumer awareness, and high demand for services and goods can propel regional demand. Emergence of key Islamic banks and financial services can further drive growth. India is expected to be a key regional market in Asia Pacific.
Fundación de la Mujer, Banco do Nordeste, ASA International, Bandhan Financial Services, Wells Fargo, Access Bank plc, Fundación WWB Colombia, Al Amana Microfinance, and Albaraka are some of the companies operating in the microfinance market. Partnerships and regional expansions are among chief business strategies adopted by many companies. Global collaborations, rising standardization, and loan approvals can offer advantages to these institutions. Efforts from banks to empower socially marginalized sectors may create business avenues. For instance, as per the cooperation protocol signed by the Egyptian Arab Land Bank (EALB) and Tamweely Microfinance in November 2018, the latter will be awarded EGP 50m during primary phase. These funds are anticipated to be used for underprivileged women and the most disadvantaged people.
Research Support Specialist, USA