Microfinance Institutions in Ethiopia, Kenya and Uganda: Loan Outreach to the Poor and the Quest for Financial Viability

Loan outreach—financial viability nexus is among the unsettled issues in microfinance literature: unyielding stance favoring viability for increased outreach to the poor (depth) versus a trade-off view justifying subsidized Microfinance Institutions (MFIs). The concern is exceedingly relevant to developing countries that opt for right policies towards financial inclusion. Even leading microfinance industries are challenged to reach the wider poor. In their microfinance operations, Kenya and Uganda ranked first and second in Africa; fifth and eighth in the world, respectively; and Ethiopia, although not in the ranking, is an emerging fellow. Yet, the loan service outreaches to the poor in these countries fall short of the escalating demand. This study contextualizes microfinance depth-of-outreach and financial viability issues in Ethiopia, Kenya, and Uganda; analyses depth of loan outreach and financial viability nexus; and quantifies the path from depth to viability.