Life cycle theory and financial sustainability of selected SADC microfinance institutions (MFIs)

Bayai, Innocent; Ikhide, Sylvanus

doi:10.1353/jda.2016.0120

Cited by 12 publications

(7 citation statements)

References 10 publications

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“…Offering savings could thus be related to better social performance. Yet, regulatory restrictions limit deposit collection by MFIs, which negatively affects their financial performance (Bayai and Ikhide, ). In a similar vein, Caudill et al .…”

Section: Discussionmentioning

confidence: 99%

“…Mersland and Urgeghe () find that commercial lending to MFIs is positively related to financial performance, while subsidized lending is related to better social performance, confirming the general conclusion that subsidies are mainly positive in terms of social performance. Bayai and Ikhide () find that low cost financing sources in terms of equity of Southern African MFIs support their financial sustainability. According to Daher and Le Saout (), the most profitable MFIs are also well capitalized and have low costs.…”

Section: Discussionmentioning

confidence: 99%

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Determinants of the Performance of Microfinance Institutions: A Systematic Review

Hermes

Hudon

2018

Journal of Economic Surveys

114

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Microfinance institutions (MFIs) generally aim at improving the access of the poor to financial services while at the same time being financially sustainable. But what do we know about how MFIs reach and combine these two goals? We carry out a systematic review of close to 170 papers discussing the determinants of the financial and social performance of MFIs. The review shows that the most important determinants addressed in the literature are MFI characteristics (size, age and type of organization), their funding sources, the quality of organizational governance and the MFIs’ external context such as macro‐economic, institutional and political conditions. The evidence on these issues is rather mixed. Moreover, the direction of the relationship between these drivers and MFI performance depends on the context, particularly the country‐specific context. Finally, there is a lack of consensus in the literature on the measurement of financial and social performance. Due to the complexity of the concept, we argue that social performance should only be assessed by using a multidimensional perspective. This can be done either by applying recent and holistic social performance measures such as the SPI4, or at least by using a combination of proxies, such as outreach, gender and rural measures.

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Section: Discussionmentioning

confidence: 99%

Section: Discussionmentioning

confidence: 99%

Determinants of the Performance of Microfinance Institutions: A Systematic Review

Hermes

Hudon

2018

Journal of Economic Surveys

114

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“…CA: Equity capital is one of the low-cost financing sources, and it supports the financial sustainability of MFIs (Bayai and Ikhide, 2016). Therefore, it is expected that equity to assets ratio would have a positive impact on the financial health of MFIs.…”

Section: Data and Variablesmentioning

confidence: 99%

Social and financial performance of MFIs: complementary or compromise?

Navin

Sinha

2020

XJM

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Purpose With the ongoing transformation of the microfinance sector, questions have been raised on the ability of microfinance institutions (MFIs) to perform financially well without compromising with their social objectives. The current study attempts to analyse the social and financial performance of Indian MFIs with an objective to find the kind of relationship between these two objectives. Design/methodology/approach The dynamic framework of simultaneous equations model is used to find the nature of the relationship which exists between social and financial performance of Indian MFIs. Findings The study finds that depth of outreach enables MFIs to achieve financial sustainability. On the other hand, financially strong MFI lend more as reflected by an increase in their average loan size. Research limitations/implications Many MFIs still receive subsidies to support their operations. Ideally, adjustments should be made to remove the effect of such subsidies on their cost. However, due to non-availability of data, the study fails to make any adjustment for the subsidies. Practical implications The presence of a complementary relationship between social and financial performance in the Indian microfinance sector is quite encouraging for the policymakers during the current time when the sector is becoming less dependent on subsidies. However, the recent upsurge in the average loan size requires attention. Social implications The findings suggest that MFIs can achieve financial sustainability while targeting poor clients. This indicates that MFIs can perform socially good along with their financial performance. Originality/value Such study is vital when the Indian microfinance sector is moving away from subsidies to become self-reliant and commercialised. Few studies have focused on this aspect of Indian microfinance sector.

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“…Mersland and Urgeghe (2013) find that commercial lending to MFIs is positively related to financial performance while subsidized lending is related to better social performance, confirming the general conclusion that subsidies are mainly positive in terms of social performance. Bayai and Ikhide (2016) find that low cost financing sources in terms of equity of Southern African MFIs support their financial sustainability. According to Daher and Le Saout (2015) the most profitable MFIs are also well-capitalized and have low costs.…”

Section: Mfi Performance and Financing Sourcesmentioning

confidence: 85%

Determinants of the Performance of Microfinance Institutions: A Systematic Review

Hermes

Hudon

2019

Contemporary Topics in Finance

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Microfinance institutions (MFIs) generally aim at improving the access of the poor to financial services while at the same time being financially sustainable. But what do we know about how MFIs reach and combine these two goals? We carry out a systematic review of close to 170 articles discussing the determinants of the financial and social performance of MFIs. The review shows that the most important determinants addressed in the literature are MFI characteristics (size, age, type of organization), their funding sources, the quality of organizational governance and the MFIs' external context such as macroeconomic, institutional and political conditions. The evidence on these issues is rather mixed.Moreover, the direction of the relationship between these drivers and MFI performance depends on the context, particularly the country-specific context. Finally, there is a lack of consensus in the literature on the measurement of financial and social performance. Due to the complexity of the concept, we argue that social performance should only be assessed by using a multidimensional perspective. This can be done either by applying recent and holistic social performance measures such as the SPI4, or at least by using a combination of proxies, such as outreach, gender and rural measures. Burzynska, K., & Berggren, O. (2015). The impact of social beliefs on microfinance performance.

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Life cycle theory and financial sustainability of selected SADC microfinance institutions (MFIs)

Cited by 12 publications

References 10 publications

Determinants of the Performance of Microfinance Institutions: A Systematic Review

Determinants of the Performance of Microfinance Institutions: A Systematic Review

Social and financial performance of MFIs: complementary or compromise?

Determinants of the Performance of Microfinance Institutions: A Systematic Review

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