2013 edition of the Global Microscope on Microfinancehighlights progress in credit bureau infrastructure, clientprotection and mobile banking
Latin American and Caribbean countries dominate the top ten; most Asiancountries experience significant improvements; Middle East and North Africancountries posted the lowest scores
October 2, 2013 – More than half the countries in the Economist Intelligence Unit’s 2013 Global Microscope improved their microfinance scores in the past year, evidence of the commitment of many governments and institutions to deepening financial inclusion.
The Microscope, now in its seventh year, examines countries’ microfinance sectors by considering the national regulatory environment and the corresponding institutional framework. Developed by the EIU in collaboration with the Multilateral Investment Fund (a member of the Inter-American Development Bank Group) and CAF (the development bank of Latin America), and with additional support from the Center for Financial Inclusion at Accion and Citi Microfinance, the Microscope scores countries as a way of benchmarking progress. Of the 55 countries studied in this year’s report, 30 improved their scores, 19 fell back and six were unchanged.
Most of this year’s improvements occurred in the Supporting Institutional Framework for microfinance, while scores for Regulatory Framework and Practices mostly declined. The growth of credit bureaus, increased client protection activities, and the expansion of mobile banking drove the improvements, with Bosnia and Herzegovina and Pakistan joining the top performers in this category. Even so, one-fifth of the countries in the study still do not have a functioning credit bureau.
Latin America and the Caribbean (LAC) once again had the highest overall regional score in the 2013 Global Microscope. LAC countries also captured half the slots in the global top ten. Asian countries experienced significant improvements in overall rankings because of changes in their institutional frameworks, led by better dispute resolution systems and improved credit bureaus. Although the four countries in the Middle East and North Africa (MENA) showed slight improvements from the year before, the region still posted the lowest overall score.
Peru maintained its number one position in the Global Microscope, a position it has held for six straight years. Its microfinance environment benefits from a well-designed regulatory environment, a competitive and innovative marketplace, and leadership in the adoption and enforcement of client protection measures. International Financial Reporting Standards have been implemented and the banking regulator oversees nearly the entire microfinance loan portfolio. A recent law regulating electronic money created a new class of transaction services companies that opens up opportunities to extend financial services on electronic platforms.
New to the top ten are the Dominican Republic and Uganda, while Nicaragua breaks into the top 15.
Improvements in credit bureaus contributed to Cambodia’s continued rise. After entering the top ten last year, Cambodia jumped two more spots this year to number six, just behind Kenya.
India rose to 16th from 22nd. Except for the State of Andhra Pradesh (AP), the country has overcome the effects of the October 2010 microfinance crisis. Indian MFIs have also made significant progress in establishing proper grievance-redress systems.
Ecuador, Mexico and the Kyrgyz Republic all faced challenging microfinance environments in 2013. Ecuador’s NGOs operating in micro-credit face more operational obstacles, while Mexico’s financial supervisor faced difficulties bringing some types of deposit-taking institutions under its supervision. The Kyrgyz Republic fell significantly in the rankings because of the imposition of interest rates caps and disruptions to the dispute resolution mechanisms.
The 2013 Global Microscope used the same set of indicators and methodology as the 2012 study. This year, however, the EIU increased consultations with microfinance institutions, networks, regulators, consultants and investors to gather additional insights.
As in previous years, the EIU completed interviews and conducted an online survey to incorporate the views of an expanded community of microfinance specialists. Finally, the 2013 Microscope study highlights the role of microfinance in the wider financial inclusion discussion as well as the role the private sector will play in expanding the range of financial products and its customer base.
The Global Microscope 2013 report and benchmarking model are available free of charge on the EIU website at: www.eiu.com/microscope2013.
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