Microfinance in the Caucasus and Central Asia. 2024 Edition

The latest study by Microfinance Centre (MFC) reveals that the microfinance sector in the Caucasus and Central Asia region has made significant strides, with the loan portfolio reaching 5.6 million euros by the end of 2023, marking a 15% growth rate. Microfinance institutions (MFIs) in this region, comprising both banks and non-bank financial institutions, are crucial players in offering financial services that cater to various needs, including business, agriculture, and household requirements.

These institutions provide a broad range of loan products, and many extend additional services such as money transfers, business equipment leasing, and car leasing. The sector’s ability to meet these diverse demands demonstrates its role in supporting both small businesses and broader economic activities across the region.

In terms of financial performance, the microfinance sector has maintained stability over the past three years.  the cost of funds has remained relatively stable at around 12%, signalling a degree of consistency in the external financing environment for these institutions.

Importantly, most MFIs in the region are profitable, with an average return on assets (ROA) of 5%. This indicates that, despite the challenges of operating in developing markets, the sector remains financially healthy and continues to generate positive returns. The overall growth, stability in cost ratios, and profitability highlight the resilience of the microfinance sector in the region, which is positioned to continue playing an essential role in driving economic development in Central Asia and the Caucasus.