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08.13.2013

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What is the measuring tool MIMOSA ?

Sponsored by PlaNet Finance Foundation, MIMOSA presents an interest to financial inclusion.

When you hear the word "Mimosa," you might immediately think of the yellow flower. But now the MIMOSA - the Microfinance Index of Market Outreach and Saturation - become useful to financial inclusion. In brief, the MIMOSA is a simple way of measuring microfinance market capacity.

Sponsored by the PlaNet Finance Foundation, this tool is a complement to the approach described from the University of Zurich. The key difference between the two approaches is that they work from entirely opposite starting points.

The Zurich team estimates that the potential market for microcredit in a given country is determined by the national poverty lines, household size and several other factors and then compares that to the number of borrowers reported to the MIX Market.

However, like all models, it has weaknesses, and the biggest one is the significant number of assumptions that it requires: who are the microfinance clients in a given country and are they well represented by looking at the national or international poverty lines? What is the level of demand for loans in a potential population? Is the lending reported in MIX a good reflection of what's happening in the overall market? And finally, what is the level of multiple borrowing in the country and to what extent does it skews the results? As anyone can imagine, the answer to these questions differs greatly from country to country.

That's why MIMOSA takes a different path by passing these tricky questions. To estimate the market penetration, this model is based on Global Findex dataset(a project funded by Bill & Melinda Gates association to measure how people in 148 countries - including the poor, women, and rural residents - save, borrow, make payments and manage risk.) This model is defined by three different indicators in order to calculate credit demand :

  • HDI : Human Development Index
  • Formal Savings : Saved at a financial institution in the past year
  • Semiformal Credit : Average of loan from a private lender in the past year


  • The heart of this model is the Human Development Index (HDI). It's a composite indicator based on different points : the economic strength (GNI per capita), life expectancy and education levels. The HDI is able to account for both the overall level of economic development and how broadly it is distributed across the population. This compound indicator provides a great support for higher retail credit use. Plus, the educational access component serves as a indicator of the quality of gouvernance.

    The second indicator of MIMOSA is the rate of formal savings. Countries where individuals are more likely to save at financial institutions tend to also have higher borrowing rates. Because savers are also usually better borrowers, it makes the financial sector more stable and more balanced.

    Finally, semi-formal borrowing is a good indicator for the intrinsic level of credit demand. Different societies show different predisposition towards credit, especially outside of family relationships and because semi-formal credit market evolve largely independently of government policy and are entirely locally funded.

    Once we have calculate credit demand using these indicators, we compare the actual credit penetration reported by Findex to the level predicted by the model and apply a penetration rating, based on the difference between the two (Table 1).

    This table allows us to note that the categories 2 and 3 seem to be normal functioning markets. However, category 1 denotes the countries in which the number of institutions offering credit appear below the potential demand. Instead, the category 5 shows the countries where the utilization of credit is twice higher than the predicted values​​, creating a significant risk.

    Though, the model is simple and avoids any focus on microfinance, many of the results appear to be quite robust and fairly well-aligned with microfinance penetration rates and expert views of countries of concern including Cambodia, Kyrgyzstan, Mongolia and Bangladesh (Figure 2).

    Figure 2 : Global View of MIMOSA Scores

    This map shows the most developed regions in microfinance. For example, Latin America, Eastern Europe and Central Asia represent a consistent pattern with regions featuring well-developed microfinance markets.

    MIMOSA is however not limited to microfinance, it also highlights the countries with a large use of credit outside of the study such as Thailand and Vietnam.

    A second advantage of MIMOSA is that it allows countries to identify potential demand for credit in countries where it does not exist. This is the case for most of African countries, the Middle East or China.

    However, as with any model, MIMOSA has its limits. The most important one is the inability of MIMOSA to recognize differences within the same country. In fact, some cities or regions can be "forgotten" in their right to credit while the rest of the country is largely served by financial institutions.

    However, in its current state, MIMOSA is an important tool for slowing the flow of credit to countries that have too much and concentrate to those which have too little.

    Source : CGAP, Rapport Planet Rating

    Key words : MIMOSA, PlaNet Finance, microfinance, microcredit, MicroWorld