Data Download: Overestimating Demand for Microcredit?

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< 25%*

* Percentage of poor households in Indonesia that borrowed from an available microlender in 3.5 years

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Although numerous attempts have been made to figure out just how much microcredit is needed, a new CGAP Brief, “Are We Overestimating Demand for Microloans?” suggests that current estimates may be too high.

The number of potential borrowers is often determined by dividing population by average household size and assuming one loan per household; reducing the overall poor population by positing a percentage who are “economically active”; or using the number of “microentrepreneurs,” based on survey or census data.

Making the necessary reductions

In order to more accurately assess demand for microloans, three further issues must be taken into account:

 Many people simply don’t want microloans. A survey of 17,000 microenterprises in Ecuador found that only one in six had requested a loan in the past 12 months.

 Some people who might want loans are not creditworthy. It’s estimated that 10 percent of households in Bangladesh are too poor to be able to use the microcredit products offered.

 People who want and qualify for loans are not necessarily borrowing all the time. In 2003–2004, microfinance institution and government microcredit programs in Bangladesh reports showed that only two-thirds of members were active borrowers at the time of reporting.