If you’ve been to any microfinance conference lately you would think that retail investors, through Kiva, have completely taken over financing MFIs or that the Gates Foundation is the only mover and shaker in this industry. But is this really the case? The microfinance funding landscape is definitely evolving – with more and different funders than ever before – but has it really changed that much?

The results of CGAP’s annual Microfinance Funder Survey, released recently, provide a bit of a reality check, showing that once again the media and propaganda in the airwaves are not really capturing what is happening in the field. The survey’s bottom line is: yes there is more money in microfinance than ever before – nearly $3 billion disbursed in 2008; and yes, there are more funders than ever before – 61 responding to the survey; but the faces that are most prominent are those we’ve seen time and again. If we look at the top five funders worldwide there aren’t any surprises KfW, AsDB, World Bank, EBRD, and IFC provide the bulk of cross-border funding to microfinance.

Development Financial Institutions (DFIs) remain the key players: 45% of total commitments are from DFIs; in ECA it is 83%. And the financial crisis highlights their importance to the sector even more. Eight of the sixteen DFIs that participated in the survey reported higher projections for 2009 due to the crisis, offering needed liquidity, and re-establishing confidence in the industry.

Ok, so how come it feels like there is such an enormous shift going on in the industry? If we look at the data a bit more closely, we see that the mixed bag of institutional and individual investors, including pension funds, commercial banks, and the largest online lending platform – Kiva - represent 7% of total commitments. This may seem small, but it’s not insignificant. Foundations account for only 4% of total commitments to microfinance. But in just a couple of years the Bill and Melinda Gates Foundation has already become the second largest grant-provider. Overall, foundations are growing faster than any other type of funder.

Digging deeper into the data it becomes clear that different types of funders fulfill different purposes. While donors provide the bulk of funding in South Asia and Sub-Saharan Africa, where microfinance industries may still be nascent, investors are prevalent in Eastern Europe and Central Asia as well as in Latin America and the Caribbean, areas which have more advanced microfinance sectors. DFIs focus on providing capital to more advanced microfinance institutions, while grant funding from bilateral agencies and foundations helps build capacity at all levels of the financial system.

So the growing mix of funders is definitely good news. With reports that 2.5 billion people are still unbanked, the issue is making sure all of this funding is going where it is most needed.