The facts are there that microlending, or microfinancing, is one of the biggest drivers of the global economy. This is because individuals and businesses receive small loans to help themselves participate in economic activities. Even people initially excluded from the formal financial system have made and continue to make their mark in the global financial ecosystem through microlending from mobile money and other microlending services.
This article highlights microlending fast facts and statistics and its critical role in the lives of individuals, businesses, and the global economy.
11 Microlending Facts and Statistics
1. There are more than 10,000 microfinance institutions worldwide
Over 10,000 microfinance institutions provide micro-loans to individuals and businesses in developing areas who lack access to traditional banking services. Microlending institutions have significantly contributed to poverty alleviation in the world, as they provide financial resources to individuals and businesses to help them generate income and improve living standards. Source: OECD
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2. There are Over 156 Million Microfinance Borrowers Globally
According to Impact Finance Barometer 2022, there were 156.1 million microfinance borrowers in 2021. This shows a 5% increase from the annual pre-pandemic growth rates between 2017 and 2019.
3. 53% of Microfinance Borrowers are Women
The primary purpose of microlending is to make financial resources available to individuals and businesses who ordinarily cannot access them. And women are at the core of this group. Furthermore, research has shown that women’s empowerment can positively impact families and communities. That’s why some microlending institutions focus on lending to women, especially those in rural areas without access to financial services. Source: Impact Finance Barometer.
4. Microfinance Lenders Provided More than $187 Billion in Lending in 2021
Microfinance institutions managed a gross loan portfolio of $187.3 billion in 2021. The growth rate was 5.9 times higher in 2021 (11.8%) than 2020 (2.0%). 69.4% of this figure was provided by the top 100 microfinance institutions in the industry.
5. South and Southeast Asia Account for 72.5% of Borrowers worldwide
South and Southeast Asia (SSEA) dominate the microlending sector in 2021, accounting for 72.5% of the total borrowers. That means over 113 billion microfinance borrowers in 2021 were from South and Southeast Asia, whose gross loan portfolio market share increased from 43.1% to 49.8% between 2020 and 2021.
Other regions in the list are Latin America and the Caribbean (LAC), accounting for 17.4% of the global borrowers; Sub-Saharan Africa, accounting for 5.1%; Middle East and North Africa, accounting for 2.8%; and Europe and Central Asia, accounting for 2.4%. Source: Impact Finance Barometer.
6. More than 1.4 Billion People Are Excluded from the Financial System
According to the World Bank, about 1.4 billion adults are still unbanked globally. That is 1.4 billion people who don’t have access to financial services through accounts with a financial institution or mobile money provider.
Even though 1.4 billion people worldwide being excluded from the financial system proves there’s a lot of work to be done, there’s hope that the number is drastically reducing. As of 2011 and 2017, this figure was about 2.5 billion and 1.7 billion, respectively.
Almost all unbanked adults come from developing countries, as 54 percent of the total unbanked people (740 million people) live in China, India, Pakistan, Indonesia, Bangladesh, Egypt, and Nigeria.
7. Over 1.6 Billion People Have Access to Mobile Money Services
Mobile money services originated in Kenya and have significantly improved global financial inclusion. According to the GSM Association, there were 1.6 billion people with mobile money accounts in 2022. This is a 13% increase from the 1.4 billion in 2021.
This growth in mobile money adoption has spurred economic activities in many rural areas, especially those in Sub-Saharan Africa, India, and Latin America and the Caribbean (LAC). People initially excluded from the financial system now have access to digital finance, as they can send and receive money, make bill payments, and more, even without having access to a formal bank account.
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8. The Global Microfinance Market is Projected to Reach $506 Billion by 2030
According to Global Industry Analysts, the global microfinance market will reach $506 billion in 2030. The market is growing at a CAGR of 12.3%. Experts expects it to remain so between 2022 and 2030, resulting in a market value of $506 billion by 2030.
The report projects that banks will record a 13.2% CAGR and reach $295.5 billion in market value, while non-bank institutions will grow at a CAGR of 11.2% within the eight years.
9. The Average Interest Rate for Microloans Globally is 35%
According to the Consulting Group to Assist the Poor (CGAP), the global average of microcredit interest rates is 35%. These interest rates vary strongly, as some countries like Sri Lanka have theirs as low as 17%, while it’s up to 80% in countries like Uzbekistan.
Since microfinance involves extending credits to individuals and businesses in rural areas, some of whom have no bank accounts, it’s considered a high-risk venture. Another reason for the high interest rate is the size of the loans microfinance institutions give, which are usually small and require high operating costs.
10. 79% of the Microfinance Beneficiaries are in Rural Areas, and 97% are women
According to the Impact Finance Barometer, 79% of the 8.1 million microfinance beneficiaries in 2021 were in rural areas, and 97% of them were women. This shows that microfinance is achieving its aim of empowering people in rural communities who ordinarily have no access to financial resources to improve their standard of living.
11. SBA Provided US Small Businesses with Microloans worth $20 billion in 2021
The US Small Business Association (SBA) provided microloans worth $20 billion to small businesses in 2021. These funds were provided to help over 6 million businesses bounce back from the losses of the COVID-19 pandemic. With these resources, they were able to pay their employees.
Conclusion
The impact of microfinance on the global economy can’t be overstated. Knowing these microlending facts will help you better reposition your business. Billions of people initially excluded from the financial market now have access to formal financial services and play their part in the global financial ecosystem.
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People’s living standards have greatly improved as they receive funding to start businesses or support their existing ones.
