What's Wrong with Microfinance?

Dichter, Thomas W.; Harper, Malcolm

doi:10.3362/9781780440446

Cited by 93 publications

(41 citation statements)

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“…Ditcher and Harper (2007) conduct a pooled OLS estimations by using data of 28 MFIs from Latin America in order to counter check the results of Christens& Drake (2002).they used a number of conventional techniques for Average Loan Size as dependent variable Their results reconfirm the finding of Christen and Drake [6].…”

Section: Literature Reviewsupporting

confidence: 67%

Commercialization and Mission Drift — A Cross Country Evidence on Transformation of Microfinance Industry

Abrar

Javaid

2014

IJTEF

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Abstract-The present study examine the most important issue faced by microfinance institutions around the world in this present era that is the commercialization trend and drifting size. This study will analyze whether the commercialization from their primary function of serving poor class of the society to moving towards better off customer in order to satisfy their urge of financial benefits. This study is using average loan size as proxy of mission drift with operational self sufficiency as profit measure, productivity as cost measure and repayment risk as independent variables in the study .The study also accommodate age ,size as control variables .Data has been taken from all the six regions of the world from 72 countries for the years 2003 to 2009.The econometric evidence using random effect estimation technique reveals that profitability and risk are positively related with average loan size where as cost is inverse relation with size of loan . The impact of age and size varies from region to region.

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Section: Literature Reviewsupporting

confidence: 67%

Commercialization and Mission Drift — A Cross Country Evidence on Transformation of Microfinance Industry

Abrar

Javaid

2014

IJTEF

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“…While some studies claim that microfinance increased disposable income and enabled poor families to move out of poverty (Khandker, 2005) other studies found no evidence of such a relationship (Kah et al, 2005;Morris and Barnes, 2005) and some even found a negative impact (Bateman, 2010;Dichter and Harper, 2007;Karim, 2011;Roodman, 2011). Even the World Bank, a powerful proponent of microfinance appears to take a more cautionary stance in recent years, concluding that 'more research is needed to assert whether there is a robust and positive relationship between the use of credit and household welfare, including moving out of poverty' (World Bank, 2007: 104).…”

Section: Poverty and Social Capitalmentioning

confidence: 99%

Microfinance and the Business of Poverty Reduction: Critical Perspectives from Rural Bangladesh

Banerjee

Jackson

2013

AMPROC

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“…However, some argue that commercialization and transformation tend to push MFIs away from their mission of serving the poor (Dichter and Harper, 2007). For example, studies such as Chahine and Tannir (2010) and Wagenaar (2014) suggest that transformed MFIs increase the size of their loans and tend to serve a lower percentage of women.…”

Section: Introductionmentioning

confidence: 99%

“…At the peak of public attention, roughly a decade ago, the microfinance movement was enthusiastically embraced by policymakers around the world, whereas in the aftermath of crises in oversaturated markets, concerns arose that profit-seeking behavior among microfinance institutions (MFIs) might harm their clients rather than benefit them (Dichter and Harper, 2007;Guérin et al, 2015). Today it is acknowledged that microfinance can have a positive impact on poor people's incomes, albeit to a lesser extent than previously hoped by many.…”

Section: Introductionmentioning

confidence: 99%

From NGOs to Banks: Does Institutional Transformation Alter the Business Model of Microfinance Institutions?

et al. 2017

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Microfinance, which pledges to provide financial services to people without access to banking, is chiefly run by non-governmental organizations (NGOs). Little is known about the extent to which the transformation of these NGOs into shareholder-owned and, most often, regulated firms affects the way microfinance institutions (MFIs) conduct their business. By applying the event study methodology to 66 MFIs that have transformed, we quantify the effect that transformation has on the MFIs' business models. Our results suggest that portfolio yield is driven down by 3.9 percentage points due to transformation, indicating that clients get more favorable interest rates. At the same time, MFIs are able to significantly cut down their operational expenses, of which 1.1 percentage points can be attributed to transformation. Other findings include a steep increase in commercial debt leverage and deposits, a significant decrease in the fluctuation of funding costs and a sharp rise in average loan size. Profitability goes down in the short and medium term, while return on equity is driven up in the medium to long run. By exploiting within-MFI data, our approach goes beyond previous studies that mainly relied on between-MFI data. Overall, the results suggest that transformed MFIs become an attractive environment for investors, potentially encouraging a more profit-seeking behavior among transformed MFIs. Acknowledgements.We thank Victoria van Lennep and Li Yang for research assistance in data gathering data. We also AbstractMicrofinance, which pledges to provide financial services to people without access to banking, is chiefly run by non-governmental organizations (NGOs). Little is known about the extent to which the transformation of these NGOs into shareholder-owned and, most often, regulated firms affects the way microfinance institutions (MFIs) conduct their business. By applying the event study methodology to 66 MFIs that have transformed, we quantify the effect that transformation has on the MFIs' business models. Our results suggest that portfolio yield is driven down by 3.9 percentage points due to transformation, indicating that clients get more favorable interest rates. At the same time, MFIs are able to significantly cut down their operational expenses, of which 1.1 percentage points can be attributed to transformation. Other findings include a steep increase in commercial debt leverage and deposits, a significant decrease in the fluctuation of funding costs and a sharp rise in average loan size.Profitability goes down in the short and medium term, while return on equity is driven up in the medium to long run. By exploiting within-MFI data, our approach goes beyond previous studies that mainly relied on between-MFI data. Overall, the results suggest that transformed MFIs become an attractive environment for investors, potentially encouraging a more profit-seeking behavior among transformed MFIs.Word count: 210

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What's Wrong with Microfinance?

Cited by 93 publications

References 0 publications

Commercialization and Mission Drift — A Cross Country Evidence on Transformation of Microfinance Industry

Commercialization and Mission Drift — A Cross Country Evidence on Transformation of Microfinance Industry

Microfinance and the Business of Poverty Reduction: Critical Perspectives from Rural Bangladesh

From NGOs to Banks: Does Institutional Transformation Alter the Business Model of Microfinance Institutions?

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