Do microfinance institutions accomplish their mission? Evidence from the relationship between traditional financial sector development and microfinance institutions’ outreach and performance

Vanroose, Annabel; D’Espallier, Bert

doi:10.1080/00036846.2011.641932

Cited by 168 publications

(175 citation statements)

References 29 publications

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“…The first stream introduces profitability analyses of MFIs' self-sufficiency and thus examines microfinance from the perspective of individual MFIs. Qualitative and quantitative research verifies the significance of regional effects on MFIs' social and financial performance (e.g., Vanroose & D'Espallier, 2013). Age, size, lending methodology and operational costs are also shown to influence MFIs' performance and efficiency (e.g., Cull et al, 2007;Hudon & Pé rilleux, 2014).…”

Section: Previous Empirical Evidencementioning

confidence: 99%

“…We fill this research gap and quantify microfinance by several generally accepted MFI performance indicators namely, number of clients served, percentage of female borrowers, average loan balance, portfolio at risk, return on assets, operational self-sufficiency, and operating expenses. Then, we improve current research that has measured economic development by GDP growth and GNI (e.g., Eigbiremolen & Anaduaka, 2014;Maksudova, 2010;Vanroose & D'Espallier, 2013) and expand our analysis to further economic development indicators that have been found to interrelate with microfinance (e.g., Morduch, 1999). Hence, we consider not only GDP growth and lagged GNI per capita but also indicators such as poverty headcount ratio, income inequality, capital formation, labor participation as well as literacy rate.…”

Section: Introductionmentioning

confidence: 99%

“…Then again, current research suggests that economic development affects microfinance as they utilize economic development indicators such as gross domestic product (GDP) growth and gross national income (GNI) per capita when modeling microfinance and MFIs' performance (e.g., Assefa et al, 2013;Vanroose & D'Espallier, 2013). A clear deficiency of existing empirical studies is, however, that although they imply the causality of effects between MFIs' performance and their macroeconomic environment (e.g., Ahlin et al, 2011;Cull et al, 2015;Imai et al, 2012) they do not ISSN 1923-4023 E-ISSN 1923 causality is of extraordinary economic importance as it is relevant for developing targeted microfinance strategies and for empirical research.…”

Section: Introductionmentioning

confidence: 99%

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The Causal Relationship of Microfinance and Economic Development: Evidence from Transnational Data

Lopatta¹,

Tchikov²

2017

IJFR

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The purpose of this study is to investigate the so far underexamined statistical causality of the relationship between microfinance and economic development. For a representative transnational dataset covering the period 1995 -2012 we instrumentalize pairwise vector autoregressive (VAR) estimation models and the Granger approach. We utilize prevalent microfinance institutions' (MFI) performance indicators as measures of microfinance as well as relevant economic development indicators that not only measure economic and capital growth but also poverty, income inequality and labor participation. We find bidirectional causal interactions between both MFIs' social and financial performance and economic development. Based on our results important implications for microfinance theory, research and practice can be derived. Future empirical research should account for the statistical causality between microfinance and economic development. In practice, purposeful and progressive action that considers the directions of causality between microfinance and economic development verified within our study should be taken to promote economic growth and poverty alleviation.

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Section: Previous Empirical Evidencementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Causal Relationship of Microfinance and Economic Development: Evidence from Transnational Data

Lopatta¹,

Tchikov²

2017

IJFR

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“…9 As pointed out by Vanroose and D'Espallier (2013), microfinance reaches more clients in countries with low financial inclusion, which is not the case of developed countries in general, and France in particular. (Gutiérrez-Nieto et al, 2014).…”

Section: By Imposing a Low Loan Ceiling On Mfis The French Conseil Dmentioning

confidence: 99%

Gender Biases in Bank Lending: Lessons from Microcredit in France

Cozarenco

Szafarz

2015

J Bus Ethics

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The evidence on gender discrimination in lending remains controversial. To capture gender biases in banks' loan allocations, we observe the impact on the applicants of a microfinance institution (MFI) and exploit the natural experiment of a regulatory change imposing a strict EUR 10,000 loan ceiling on microcredit. Descriptive statistics indicate that the presence of the ceiling is associated both with bank-MFI co-financing and with harsher treatment of female borrowers. To investigate causal links, we develop an econometric approach that addresses the concerns of selection biases, multicollinearity, and endogeneity. Our empirical findings suggest that the change in the MFI's gender-related attitude was triggered by banks through co-financing. Hence, we speculate that co-financing pushes ceiling-constrained MFIs to import whatever biases in loan granting that the banks are prone to. Overall, this paper stresses that apparently benign regulations such as loan ceilings can significantly harm the women's empowerment efforts made by MFIs.

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“…This proxy indicator helps to uncover whether the bank interest rate policy may influence the interest rates of the MFIs. According to Vanroose and D'Espallier (2013), the MFIs achieve a better profitability in the countries where the access to traditional banking products is lower, as the borrowers do not have as much choice whether to apply for a loan in a bank or in a MFI. The linear dependence among the variables considered in this study is described in the correlation matrix in Table 4.…”

Section: Datamentioning

confidence: 99%

Macroeconomic factors influencing interest rates of microfinance institutions in the Latin America and the Caribbean

Janda¹,

Zetek²

2014

AGR ECON-CZECH

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Agricultural output in developing countries still represents a substantial part of the GDP. Th is ratio has actually increased in some areas such as the Latin America. As such, there is an increasing importance of microfi nance institutions (MFIs) focusing on the activities associated with agriculture and encouraging entrepreneurship in agriculture and in the rural communities in general. Th e contribution of microfi nance institutions consists mainly in providing special-purpose loans, usually without collateral. However, questions exist as to the magnitude and the adequate level of risk of providing micro-credit loans in relation to the interest rates being charged. We review two main approaches to setting interest rates in the MFIs. One approach takes the view that interest rates should be set at a high level due to the excessive risk that these institutions undertake. Th e second approach is to convince the public of the possibility of reducing these rates through cost savings, increased effi ciency, and sharing best practice, etc. Subsequently we econometrically analyse the impact of macroeconomic factors on the microfi nance interest rates in Latin America and the Caribbean. We show that these results depend on the chosen indicator of interest rate.

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Do microfinance institutions accomplish their mission? Evidence from the relationship between traditional financial sector development and microfinance institutions’ outreach and performance

Cited by 168 publications

References 29 publications

The Causal Relationship of Microfinance and Economic Development: Evidence from Transnational Data

The Causal Relationship of Microfinance and Economic Development: Evidence from Transnational Data

Gender Biases in Bank Lending: Lessons from Microcredit in France

Macroeconomic factors influencing interest rates of microfinance institutions in the Latin America and the Caribbean

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