Posted by: Taea Calcut
MFIs seek to provide financial products and services to those excluded from formal financial systems. A variety of factors can contribute to individuals' exclusion, one of which is their geographic location. In this post, we examine the geographic outreach of 201 MFIs worldwide that submitted MIX Social Performance reports in 2008, exploring their targeted and real market locations, services offered where no other financial services exist, and the effects of country-level factors like population density and urbanization levels on MFIs' operations. (Note: in all examples discussed below, we recognize that sample sizes remain too small to draw definitive conclusions. However, we present information with the goal of encouraging greater numbers of Social Performance Report submissions as well as framing potential research questions for the future.)
Graph 1: MFIs’ Geographic Outreach by Region (n=201)
First, are there trends in MFIs' geographic outreach by region? Graph 1 above illustrates the breakdown of MFIs serving majority populations in rural or urban/semi-urban environments. We find that, in our sample, MFIs reporting from the East Asia & Pacific (EAP), South Asia (SA), and Sub-Saharan Africa (SSA) regions are more likely to have the majority of their client populations residing in rural areas. Alternately, MFIs reporting from the Eastern Europe & Central Asia (ECA), Latin America & Caribbean (LAC), and Middle East & North Africa (MENA) were more likely to have the majority of their client populations residing in urban/semi-urban areas.
Second, what percentage of MFIs consciously target a particular location? When asked whether their target markets were “rural” or “urban/semi-urban,” the majority of MFIs (151, or 75%) did not identify one location or another. Among the remaining MFIs, 28 (14%) exclusively targeted urban areas while 22 (11%) exclusively targeted clients living in rural areas.
Third, we asked whether or not the MFIs sampled have service points in areas where there are no other MFIs or bank branches. The data reveals that only a minority of MFIs (29, or 14%) do in fact offer service points in these areas while the majority (172, or 86%) do not. Among the 29 MFIs, these service points composed on average 56% of all service points offered while serving 45% of total clientele. (However, the report does not tell us whether that is the result of an MFI’s commitment to geographic outreach or whether it is simply reflective of the level of market competition in a given country.)
Fourth, with an eye to future research possibilities, we compared SP report data with 2008 World Development Indicators (WDIs) from the World Bank, to look at potential relationships between MFIs' geographic outreach and country-level indicators. Specifically, we asked:
(1) Does the majority of an MFI’s clients live in a location where the majority of the country’s population resides? (That is, a country has a majority urban population, as indicated by a WDI country urbanization rate of 51% or higher, is a MFI likely to have a majority urban clientele and vice versa.)
(2) Are MFIs more likely to serve rural areas in countries with high population density?
In the first question, we found that the majority of MFIs in our sample (135, or 67%) tend to serve clients in those locations where the majority of a country’s population resides. Of the remaining 52 MFIs that serve locations where the minority of a country’s population lives, there is an even split between those MFIs that serve a majority rural clientele in a urbanized country (26, or 13%) and those that serve a majority urban clientele in a predominately rural country.
For the second question, we found that there appears to be a positive correlation between MFIs’ geographic outreach and given country’s population density. In our sample, the 105 MFIs serving a majority urban clientele operated in countries with an average population density of 95 persons per sq. km while the 75 MFIs serving a majority rural clientele operated in countries with an average population density of 186 persons per sq. km.
As noted earlier on, in all cases our discussion faces sample size limitations. However, the early data presents interesting relationships that we hope will be explored in further detail at a later date. For now, we ask our readers, is there anything in the data that surprises you? Are there other questions that you hope MIX asks of MFIs in the future? What do you think are some of the geographic constraints faced by MFIs and how might they be overcome to reach excluded populations in the future? We look forward to your discussion in the comments below.
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