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Asian microfinance stands at the leading edge of the industry, globally. Its achievements in outreach are dazzling by all accounts, and are largely based on five very large microfinance institutions: ASA, BRAC, BRI, Grameen Bank and Proshika. However, a large fraction of the population remains excluded from financial services, with wide disparities in operating environments of microfinance institutions limiting overarching conclusions on the performance of the sector. Only as more institutions commit themselves to financial transparency, common threads will begin to emerge.

Current growth among microfinance institutions extends sustainable services to an increasing number of clients and brings them ever-closer to financial integration. However, access to a large pool of external funds has proven to be a double-edged sword for Asian institutions, fueling their rapidly growing portfolios, while requiring specific strategies for maintaining profits. In response to drastically different operating environments, institutions pursue two separate courses as they vie for profitability, with some boosting revenues and others minimizing costs. But profitability has yet to fully make its mark on the region as certain markets are still subject to cultural and political taboos around interest rates, which is dampening growth and limiting potential outreach.

Growing evidence suggests that new technology and innovation in delivery mechanisms, combined with increasing competition, are most likely to push down prices to clients without sacrificing outreach. Both within countries and across the region, institutions differ in their degree of self-conception as development programs or financial institutions broadening access for underserved populations. In many cases there is a perceived trade-off between the measures necessary for financial sustainability and outreach.

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