*This is from my bi-weekly post on Lumana.org/blog
Lately I've been working with a lot of MIX Market data in order to see trends in the microfinance industry around the world. In today's post, I'm looking at the average write-off percentage in comparison to the average loan size.
By advancing the years on the control next to the map below, you can see that from 1995 to 2009 the average size of loans (denoted by the shade of orange) around the world has increased, and the average default rate has also increased (denoted by the size of the circles). The same information is in the line graph only reveals that, when looking at all MFI's in aggregate, the write off percentage does increase linearly - although it does around that industry touted benchmark of 2%.
So, it appears as though MFIs are providing larger and larger loans every year despite the global recession. Is this due to inflation within each market, or is it merely a result of better reporting? (We can see the number of MFIs reporting balances in 2005 was only 2, compared to 1,146 in 2008.)
What is comforting to see is that in the third picture, the heat-map, I've used Excel and broken average loan size out by $100 and plotted the maximum default rate for each year. As we would hope, it is a boring and predictable chart showing that as average loan size rises, there tends to be a lower default rate.
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