2004 Microfinance Sector Development in Eastern Europe and Central Asia (ECA)

This paper summarizes the mapping study of the microfinance sector in the region of Eastern Europe and Central Asia (ECA). The study was conducted with the aim to understand the development of the sector in 2004 across regions and institutions. It reviews the performance of the MFIs in terms of their activities and financial status.

The prelude to the paper gives the reader a comprehensive understanding of the region and the institutions in the sector. The information about the size of the MFI includes number of MFIs, loan portfolio size and the clientele and services. It describes the financial performance as an essential component comprising of:

• Profitability;
• Portfolio yield;
• Revenue and expenditure;
• Productivity;
• Portfolio quality.

The paper looks closely at the MFI products and their delivery mechanisms, as well as the resources they utilize like funding, infrastructure and human resources. The challenges the sector faces are:

• Lack of regulations governing microfinance activities;
• The competition for best client;
• Fund constraints.

To overcome these constraints, the paper stresses on the need for long term business plans for the MFIs with emphasis on the strategic goals. The paper ends on the note where most MFIs in the ECA region expect to be integrated to mainstream financial sector in future.