21 Microfinance Statistics You Need to Know
Tom has 15 years of experience helping small businesses evaluate financing and banking options. He shares this expertise in Fit Small Business’s financing and banking content.
This article is part of a larger series on Business Financing.
Microfinancing stimulates economic growth by providing small loans to those that cannot obtain conventional lending. Microfinance is used worldwide, with loans smaller than $100 offered in some underdeveloped countries. In the United States, microfinancing refers to loans of $50,000 or less.
The following 21 statistics offer an opportunity to learn more about how microfinancing works and about those it serves.
1. There Are More Than 10,000 Microfinance Institutions Globally
Microfinance institutions aren’t banks—they are organizations geared specifically toward low-income populations. They provide credit and banking services to those most in need. There are approximately 10,000 microfinance institutions throughout the world.
2. Microfinance Lenders Provide More Than $120 Billion in Lending
According to the Microfinance Barometer, microfinance institutions worldwide serve more than 140 million borrowers and have a total loan portfolio estimated at $124 billion. Prior to COVID-19, microfinance lending portfolios grew by at least 8% for three consecutive years.
3. South Asia Accounts for 60% of Global Microfinance Borrowers
More than 85 million microfinance borrowers reside in South Asia, the world’s largest microfinance borrowing region by population served. South Asia is also the second biggest microfinance borrower, at $36.8 billion, or nearly 30% of the global microfinance industry. Latin America is the largest, at nearly $48 billion.
4. Women Make Up 80% of First-time Microfinance Borrowers
The intent of microfinancing is to provide small loans and financial services to those who would otherwise be unable to obtain credit. Women are often disadvantaged both because of poverty and because of social norms. Some microfinance lenders choose to focus primarily on providing financing to women in an effort to encourage economic growth and to work toward gender equality.
5. Microfinance Loans Had a 98% Repayment Rate Prepandemic
Traditionally, microfinance loans have had a 98% repayment rate. Since the development of the COVID-19 pandemic, repayment rates have dropped below 90% in some developing countries such as India, consequently resulting in a substantial decline in new microfinance lending in these areas.
6. Microfinance Portfolios Are Growing Slowly Despite COVID-19
COVID-19’s impact on microfinance has been substantial but hasn’t threatened the industry. Microfinance data from the Consultative Group to Assist the Poor (CGAP) identifies loan portfolio growth at around 2% in most parts of the world, which shows that individuals are still able to gain access to money. However, the number of new borrowers has declined as lenders have focused on supporting existing borrowers’ financing needs.
7. More Than 2 Billion People Lack Access to Financial Services
Despite the extensive efforts to provide funding through microfinance, more than 2 billion people globally are still outside the banking system. Only 20% of the world’s estimated three billion poor have access to microfinance. While microfinance has grown extensively in the past decades, it remains unable to reach the majority of its target market.
8. However, More Than 1.2 Billion Have Access to Mobile Money Accounts
Mobile money accounts (MMAs) allow individuals to send money to each other or to purchase goods and services from businesses authorized by an MMA provider. MMAs provide additional security by no longer requiring money to be stored at home, making theft less common and leading to additional wealth. Globally, the number of registered MMAs grew by 12.7% in 2020.
9. More Than 3 Times as Many Africans Use Mobile Money Accounts vs Traditional Banks
Approximately 11% of Ugandans have a conventional bank account. However, 42% have access to MMAs. In Kenya, MMAs have lifted nearly 200,000 households out of extreme poverty during the 2010s. Throughout Africa, the use of MMA services is allowing individuals to move money quickly and safely for the first time. Additionally, MMA services are allowing many individuals to save money securely, reducing the risk of theft.
10. Self-employed Poor Make Up Half of the Labor Force in the Developing World
Despite being the majority of the labor force, entrepreneurs in the developing world cannot obtain financing from conventional financial institutions. Microfinancing allows them access to capital to grow their business, their personal income, and the economy of the surrounding community.
11. Microfinancing Is Projected to Reach $394.8 Billion By 2027
Despite uncertainty about the short-term impacts of COVID-19 on finance globally, projections strongly suggest microfinancing will continue to grow. One estimate suggests microfinance lending could reach $394 billion by 2027. Despite the pandemic slowing the growth of new microfinance borrowers, some analysts project that, as the world recovers from COVID-19, there will be growth in new borrowers receiving microloans.
12. The Average Microloan Globally Is Less Than $1,000
Among the more than 140 million recipients of microfinance support, the average microloan is approximately $885. Microloans can be as small as $100 or less; however, the average amount of an SBA 7(a) loan approved in the last federal fiscal year was $501,216.
13. The Average Interest Rate for Microcredit Globally Is 37%
While the global average is high, keep in mind that microfinancing serves populations that are considered high risk, as well as those who lack access to traditional financing. Some people consider the high interest rate to be problematic, as it places borrowers at risk of not being able to pay their loans back. Fees can rise as high as 70% in some locations.
14. Almost Half of Smaller Business Loan Applications Aren’t Approved Fully
American small businesses seeking to apply for loans of up to $25,000 often don’t receive their full application amount. 48% of those surveyed didn’t receive all the money that they were looking for when they initially applied.
15. In 2020, $85 Million in SBA Microloans Were Approved
The Small Business Administration has been offering microloans since 1992. In 2020, it gave out $85 million in microloans to 5,890 people. The average loan was $14,434 and the average interest rate was 6.5%. These microfinance statistics detail the past five years of SBA microloans:
Small Business Administration Loans 2016 to 2020
FY | # of microloans approved | Amount (in millions) |
|---|---|---|
2016 | 4,506 | $61.2 |
2017 | 4,958 | $68.5 |
2018 | 5,457 | $76.7 |
2019 | 5,532 | $76.7 |
2020 | 5,890 | $85.0 |
Source: Small Business Administration
16. Minority-owned Businesses Received 51.5% of SBA Microloans in 2020
Of those businesses that chose to provide demographic information, minority-owned or -operated businesses received 51.5% of SBA microloans in 2020. Those loans represented 38.7% of the available amount to be issued.
17. Women-owned Businesses Received 46.6% of SBA Microloans in 2020
About 46.6% of all SBA microloans approved in 2020 went to women-owned or -controlled companies, totaling 38% of the total amount.
18. In 2020, 80% of SBA Microloans Were Used for Working Capital
The SBA Microloan program is often used for more than one purpose. In the last fiscal year, SBA microloans were most commonly used for working capital (80.3%), equipment (20.5%), materials (12.0%), supplies (3.7%), and inventory (0.3%).
19. Small Businesses Are Earmarked to Receive $20 Billion in Microloans in 2021
This is one of the most important statistics for American entrepreneurs who are interested in microfinance in 2021: the SBA has allotted $20 billion to microloans for disaster relief, with plans to pass funds out to 6 million small businesses.
20. In the US, 19% of Microfinancing Went to Rural Borrowers
This statistic isn’t surprising, given that 80% of the US population resides in urban areas. The 60 million rural Americans who comprise the remaining 20% of the US population received a proportionate amount of SBA microloans compared to those in metropolitan areas.
21. Globally, 65% of Microfinancing Went to Rural Borrowers
Unlike the US, where the majority of SBA microloans were advanced to those in cities and suburbs, urban recipients are in the minority globally. The Microfinance Barometer for 2019 indicated that most recipients worldwide were those in rural areas.
Bottom Line
Microfinance plays an important role in our global economy. It provides access to financing to underserved communities and increases the economic livelihood of the world’s most impoverished. Microfinancing stimulates the economy by allowing new businesses to open, helping microenterprises to grow, and changing the lives of those who receive funding.
