Kosovo 2009: Microfinance Analysis and Benchmarking Report

This paper analyzes current trends in the microfinance sector in Kosovo.

Most MFIs in Kosovo started as economic development programs of international humanitarian organizations. There are currently 14 MFIs operating mainly in rural areas. Current trends in the Kosovo microfinance industry include:

• Total penetration rate of 15 percent, signifying scope for growth of the sector in the next few years;
• Permission for MFIs to transform into licensed deposit-taking institutions or registered institutions;
• Continuous and strong growth in MFI outreach, profitability and efficiency in 2008;
• Heavy reliance on remittances;
• Decrease in remittances leading to decrease in clients purchasing power and decrease in MFI loan sizes;
• Influx of foreign debt investment;
• High profitability driven by decreased expenses;
• Low provisioning expenses, denoting lower MFI risk;
• Increased efficiency due to economies of scale and improved staff efficiency.

2009 will be a more challenging year for Kosovo MFIs as the effects of the economic slowdown reach more microfinance clients. Provisioning expenses are expected to increase as a result of increased risk levels. Efficiency gains may be lower in 2009 due to the slowdown in portfolio growth.