An April 2005 report on the financial performance of Africanmicrofinance institutions (MFIs) finds that more than half of those surveyedfail to turn a profit. Conventionalwisdom (and much of the writing on this site) tends to say otherwise–that microfinanceis profitable. Maybe that’s a big reasonwhy this report, jointly published by the DC-based Consultative Group to Assist thePoor (CGAP) and the Microfinance Information Exchange, is so important.
Most African MFIs are not out just for profit–often, theirprimary mission is to serve poor, at-risk groups and profit if possible. That explains why cooperatives generally failto profit, while regulated microfinance providers–which behave more likebanks–average a 2.6 percent annual return on assets. The report identifies poor infrastructure,hard-to-serve rural markets with low population density, and high labor costsas barriers to MFI profitability.
