Microfinance: Where do we Stand?

Aghion, Beatriz Armendáriz de; Morduch, Jonathan

doi:10.1057/9780230374270_5

Cited by 39 publications

(14 citation statements)

References 7 publications

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“…As MFIs receive more funding, they are less dependent on the success of their own operations. Moreover, although MFIs may claim that they are profitable, they may still use subsidies to cover costs (De Aghion & Morduch, 2004;Hudon & Traca, 2010). According to Quayes (2012), initially, it was expected that MFIs would wean themselves off donor subsidies and achieve self-sufficiency as the rate of recovery of loans increased, but other research contends that the high rate of recovery in the microcredit industry has failed to transform the donor-dependent MFIs into independent self-sustaining organizations.…”

Section: Oss In the Context Of Mfismentioning

confidence: 99%

Microfinance institutions’ operational self-sufficiency in sub-Saharan Africa: empirical evidence

Remer

Kattilakoski

2021

Int J Corporate Soc Responsibility

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The topic of financial sustainability in microfinance institutions has become more important as an increasing number of Microfinance Institutions (MFIs) seek operational self-sufficiency, which translates into financial sustainability. This study aims to identify factors that drive operational self-sufficiency in microfinance institutions. To accomplish this, 416 MFIs in sub-Saharan Africa are studied and several drivers for operational self-sufficiency are empirically analyzed. Results indicate that these drivers are return on assets, and the ratios total expenses/assets and financial revenues/assets. The results imply that MFIs should encourage cost-management measures. They also reveal that there may not be a significant tradeoff in self-sufficiency and outreach. These findings will enable microfinance institutions worldwide to sharpen their institutional capabilities to achieve operational self-sufficiency and also provide policymakers with more focused tools to assist industry development.

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Section: Oss In the Context Of Mfismentioning

confidence: 99%

Microfinance institutions’ operational self-sufficiency in sub-Saharan Africa: empirical evidence

Remer

Kattilakoski

2021

Int J Corporate Soc Responsibility

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“…These loans are very small, as low as US$75, and are usually short-term loans repaid on a weekly basis over one year. There are more than 67 million households served by micro-finance programs globally [16]. There are 1033 large scale MFIs globally that offered their services to 116.6 million borrowers in 2015 [17].…”

Section: Overview Of Micro-finance and Its Institutions In Bangladeshmentioning

confidence: 99%

“…Moreover, MFIs provide the needed services to more poor clients, as well as lower the costs of capital by transforming into deposit-collecting institutions [42][43][44]. MFIs with access to donor funds may not have the pressure to make the profit; that is why they may deliberately choose outreach over efficiency by serving poorer or rural clients with higher delivery costs [16]. According to scholars [45][46][47], profit-driven loans from private sources can be more successful at achieving social objectives than money from the public, or tax-payer sources.…”

Section: Capital Structure and Sustainability Of Mfismentioning

confidence: 99%

Capital Structure, Financial Performance, and Sustainability of Micro-Finance Institutions (MFIs) in Bangladesh

et al. 2020

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Capital structure plays an important role in organizational performance. Sources of funds for micro-finance institutions (MFIs) and their performance and financial sustainability become an important topic for the MFIs and poverty alleviation initiatives to achieve sustainable development goals of the UN. We explored the following question: Does the financial structure in terms of financial leverage affect the financial performance: Financial sustainability, depth, and breadth of outreach of MFIs? Our research focuses on studying the relationship between capital structure and financial performance of micro-finance institutions as well as achieving the objectives of this program by reaching out to the deserving clients without collaterals. A dataset of 187 MFIs is used to establish the relationship between the capital structure and performance of MFIs. Panel data regression analysis has been used for this study using the Random effect and Fixed effect models. Return on Asset (ROA), and Net Income to Expenditure (NIER) have been used as measures of financial performance. The findings indicate that Equity to Asset Ratio (EAR), Debt to Loan Ratio (DTL), Risk, and Size are the factors that influence NIER. Furthermore, EAR, and DTL have a positive effect on ROA, and Risk has a negative effect. The findings of this study will enable MFIs to configure their capital structure by creating a portfolio of sources of their capital from market-based sources of funds that can maximize their financial performance and reach out to poor clients without collaterals.

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“…Despite these challenges, innovations in the financial sector and changes in policies of developing countries have facilitated the provision of some forms of financial services to underserved market segments (de Aghion and Morduch, 2004; Navajas et al , 2000). The more successful financial advances are innovations that take into account client characteristics and their living environment.…”

Section: Where Does This Study Fit In the Microfinance Literature?mentioning

confidence: 99%

Re-visiting traditional trust measurement: using artefactual field experiments to measure trust and predict micro-lending decisions

Buck

Kusunose

Alwang

2020

AFR

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PurposeThe purpose of this work is to experimentally measure trust and study its relationship to group loan allocation within a community bank.Design/methodology/approachAn artefactual field experiment is run to capture a measure of trust that mimics aspects of trusting behavior in a community bank. The experimental design and empirical setting take into account risk and altruism, two known confounders of trust measures. Regression analysis is used to estimate the relationship between a novel measure of trust and the loan amount a borrower receives from their rural community bank.FindingsThe trust measure has a statistically significant, positive relationship with loan size. A one standard deviation increase in the trust measure corresponds to a 13.3 percent increase in the loan amount.Social implicationsResults of the study suggest that, for community banks, trust in a borrower plays a large role in screening applicants and therefore determining loan size. Several such banks have considered graduating to commercial credit. However, given the outsize role of trust in lending decisions, it is not clear if commercial lending models – which rely less on social capital – will work.Originality/valueA new trust game is developed that captures relationship-specific measures of directed trust that community bank members have towards each borrower. The trust measure is also context-specific as play in the game is analogous to how community bank members trust some borrowers (more than others) with larger loans. The emphasis on relationship- and context-specific trust measures is key to interpreting results from artefactual field experiments.

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Microfinance: Where do we Stand?

Cited by 39 publications

References 7 publications

Microfinance institutions’ operational self-sufficiency in sub-Saharan Africa: empirical evidence

Microfinance institutions’ operational self-sufficiency in sub-Saharan Africa: empirical evidence

Capital Structure, Financial Performance, and Sustainability of Micro-Finance Institutions (MFIs) in Bangladesh

Re-visiting traditional trust measurement: using artefactual field experiments to measure trust and predict micro-lending decisions

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