WHY CAN'T MFIs GROW FASTER?
Most MFIs Lack Access to Capital Markets
Even though the industry has demonstrated that MFIs can be self-sustaining businesses, most still rely on a limited pool of donor dollars. Without access to capital, growth traditionally stops once initial grant money is distributed as microcredit loans.
To scale rapidly, MFIs must access large amounts of capital to expand their operations and provide loans and other financial products to dramatically more clients. These large amounts of capital are accessible only through the formal capital markets, and currently most MFIs have neither the track record nor the clearly articulated business plan to attract this funding. In fact, a 2007 Deutsche Bank study estimated that the microfinance sector currently faces a $250 billion funding gap.
Most MFIs Lack Large-Scale Operating Capacity
Without sufficient internal operating capacity, growth stops once a program reaches several thousand clients. Adequate internal operating capacity includes improvements in areas such as information technology infrastructure, internal controls, new product development, and human resources.
When MFIs rely on donor dollars, there is rarely enough money to make the necessary investments in these key areas to create an efficient operation that can grow on a sustainable basis. That's why most MFIs are built small and stay small.
