Demand for credit from microfinance institutions to grow 10-15% in 2010: responsAbility

By Matthew Fuchs

Christian Speckhardt, CIO, ResponsAbility

Microfinance Focus, Feb 18, 2010: Demand for credit from microfinance institutions is expected to increase 10-15% in 2010 as MFIs revert to a modest growth path, ResponsAbility’s Chief  Investment Officer Christian Speckhardt said. This will be in response to increased demand from micro-entrepreneurs in-line with strengthening economic conditions across most emerging economies, he explained.

“The MFI themselves are also likely to revert to a modest growth path. However, this will depend to a large extent on how quickly the quality of the MFI loan portfolios improves… In some countries and regions, a marked improvement could already be seen in credit quality, while in other regions such as Central America and Eastern Europe, risk metrics are likely to continue to rise slightly,” Mr Speckhardt said in an e-mail sent to Microfinance Focus.

This year will be one of “transition and maturity” for the microfinance sector, which will emerge stronger after the recession. For example, excessive competition was evident in some countries leading to increased problems of over-indebtedness, he added.

“The main culprits were new entrants to the market in the shape of foreign banks mainly offering consumer credit. They have since withdrawn from the market again or suspended the activities in question,” he argued. It has also led to re-focusing on loan officer accreditation, he added.

responsAbility foresees more transactions in local currencies, which will boost investment opportunities in Africa. Mr Speckhardt is confident about finding interesting opportunities in the private equity space due to consolidation and expansion in the sector.

On the downside, responsAbility believes that interest rates will stagnate or decline slightly, particularly in areas where International Financial Institutions are active. However, the fund manager believes most of the risk remains more specific at the country level.  responsAbility AG is a microfinance investment fund manager based in Zurich, Switzerland.

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