We construct a theoretical framework that puts the social worth of a microfinance organization (MFO) in terms of the depth, worth to users, cost to users, breadth, length, and scope of its output. We then analyze evidence of depth of outreach for five MFOs in Bolivia. Most of the poor households reached by the MFOs were near the poverty line-they were the richest of the poor. Group lenders had more depth of outreach than individual lenders. The urban poorest were more likely to be borrowers, but rural borrowers were more likely to be among the poorest.
This paper describes a new index of the quality of the business environment for microfinance institutions. Regressions are used to validate the index by linking it and its sub-components to microfinance outcomes. We find that the components of the index related to the supporting institutional framework are strongly linked to measures of microfinance penetration. Components related to the framework for regulation and supervision are more strongly linked to outcomes at the MFI level, including loan portfolio quality, financial self-sufficiency, average loan size and the share of lending to women. Many of these relationships are robust to using instrumental variables estimation.
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