The relationship between the performance and legal form of microfinance institutions

Abstract

This paper investigates the relationship between the legal forms adopted by microfinance institutions (MFIs) and their performance within three scopes: financial performance, social performance, and efficiency in resource allocation. The MFIs studied are classified into four groups: banks, non-governmental organizations, cooperatives, and a fourth group formed of for-profit institutions not characterized as banks, made up of non-bank financial institutions (NBFIs) and rural banks. The data used are annual and cover the six years from 2007 to 2012. The quantitative regression model with panel data was used together with dummy variables to compare between the four groups of legal forms, except for the group made up of NBFIs and rural banks, which was not represented by any dummy variable. 304 MFIs from 59 countries made up the sample. In the study it was observed that larger MFIs have higher profits, higher returns, and higher operational self-sufficiency rates than smaller MFIs, indicating that MFI growth could enable consolidation in the microfinance market. The results also indicate that for smaller MFIs the way to consolidate and improve the indicators could be through assimilating or merging with other MFIs. It was also noted that non-bank financial institutions and rural banks are able to serve more customers and that cooperatives provide smaller loans, causing a bigger social impact, and that they obtain higher returns and profits. The results indicate that these legal forms may be the most appropriate for the microfinance market.

Ownership, Risk and Regulation of MFIs in Central Africa Countries

“…The result departs a bit from Akume and Badjo Ngongue [35] findings who outlined high levels of FACR in CamCULL affiliates. By contrast to Araújo da Costa [40], we document that there is no specific ideal set up in terms of capital structure between ownership forms. The resulting solvency ratio can be attributed either to an external regulation exerted by COBAC or to an internal regulation by shareholders.…”

Efficiency and Performance of Microfinance Institutions: A Systematic Literature Review

“…The concept of sustainability has been a subject of ongoing debate in microfinance (Costa, 2017). In recent years, there has been increasing recognition of the need to ensure the long-term sustainability of microfinance institutions, particularly in light of the rapid growth of the industry and concerns about over-indebtedness and client protection (Bhayana & Sharma, 2022).…”

“…The inquiry of 'sustainability' in microfinance is a subject of ongoing debate (Baumann, 2004).To continue providing financial services to people experiencing poverty on a sustaining basis, the MFIs themselves must be viable and sustainable. MFIs aim for long-term sustainability while seeking returns on their activities (Costa, 2017). Additionally, many MFIs define sustainability as the capacity to maintain long-term operations rather than a strictly financial definition.…”

O impacto do microcrédito e sua função social – saúde financeira do trabalhador / The impact of microcredit and its social function – financial health of workers

“…Segundo Costa (2017), devido ao apelo social das microfinanças, as entidades podem receber Braz. J. of Bus., Curitiba, v. 3, n. 5, p. 3874-3886, out./dez.. 2021. z recursos de governos, investidores e doadores.…”