Each of the countries in the study were assigned a score (0=worst to 4=best) for each of the factors above, and a composite (index) score was computed:
The institutional and regulatory framework for microfinance: Regulation of microcredit operations; Formation and operations of regulated/supervised specialised MFIs; Formation and operation of non-regulated MFIs; Regulatory and examination capacity The general investment climate: Political stability; Capital market stability; Judicial system; Accounting standards; Governance standards; MFI transparency The level of institutional development: Range of MFI services; Credit bureaus; Level of competition
Bangladesh, home to Grameen Bank, is smack in the middle of the pack. The report also ranks the countries using scores for Regulatory Framework, Investment Climate, and Institutional Development. Of the the three areas, Institutional Development seems to best capture the sophistication of the financial services infrastructure. Some might find it surprising that Credit Bureaus are starting to take hold in many countries in the developing world, including the top three ranked countries Peru, Bolivia, and the Philippines.
Many countries in the developing world are full of aspiring entrepreneurs. Microfinance was historically designed to help meet the most basic needs, but nowadays Microfinance institutions are rolling out more sophisticated financial products. I hope the Economist refreshes this study on a regular basis.