Microfinance – CLSA U Speaker series

What is microfinance? How did it start out? What is the average size of a micro loan? Who are the typical borrowers and more importantly why has micro finance done so well?

Find these answers and more in our latest 43-page CLSA U report, Speaker Series, Money for everyone (Microfinance). Analyst Bret Ginesky together with Microfinance Innovation Center for Resources and Alternatives (MICRA) takes a deep-dive into the world of microfinance, and finds amazing opportunities in a country where only 17% of the population take out loans, and 82% of the population depends on Micro and small enterprises for a livelihood. (See attached summary report. Please ask for the full version).

Key points from the report:
Over 45,000 microfinance institutions (MFI) exists in Indonesia, and Bank Rakyat's (BBRI) is the largest with a loan portfolio of US$5.4bn
While the average micro loan for BBRI is US$1,000, the definition of micro loan in Indonesia is quite high, at up to US$5,000, with interest commonly applied at 2% per month
The most likely MFI customers are male traders with existing microenterprise in the informal economy, and only 15% of these microentrepreneurs will access external fund
Savings accounts are highly demanded; 17% of Indonesians take out loans while 40% have a savings account
Commercial banks are opening their own microfinance units, increasing competition in urban areas on Java while rural areas continue to be underserved
Opportunities abound in this industry, ranging from a US$5bn a year remittance market, to multipurpose loans that helps fuel consumption
Main barrier to entry stems from issues such as legal form challenges and legislation risks