Institutional framework and capital structure of microfinance institutions

Funding Strategy and Performance of Microfinance Institutions: An Exploratory Study

“…MFIs receive subsidized equity in the form of donations and cash. To measure the component of equity that is subsidized, existing literature measures donated equity either as the proportion of donated equity (grants) to total assets (Bogan, ; Tchakoute Tchuigoua, ) or by subsidy intensity measured by the ratio of donated equity divided by total equity (Hudon, ; Hudon and Traca, ). In this study, we measure donated equity as the percentage of the book value of assets.…”

“…By the end of 2011, when we gathered data, we counted about 1900 MFIs that had voluntarily disclosed information to the MIX. The MIX data is self‐reported, thus raising the question of data reliability identified in some studies (Bogan, ; Hudon and Traca, ; Tchakoute Tchuigoua, ), given that the accounting information and social performance data are transmitted by MFIs and not collected, verified, and processed by the MIX. To limit the effect of the reliability of data, we focus on MFIs with four and five diamond disclosure ratings on the MIX.…”

“…Data come from the Micro‐Information eXchange database (MIX), a web‐based microfinance platform that provides accounting information on MFIs. Its use is growing in MFI research, as highlighted by some recent studies (Bogan, ; D’Espallier et al ., ; Tchakoute Tchuigoua, ). To date, the database discloses information on more than 2000 MFIs.…”

“…Mersland and Urgeghe () show that some MFI‐level variables, such as profitability and better outreach, are more likely to increase MFIs’ ability to attract international commercial debt. Tchakoute Tchuigoua () addresses the question of whether better institutional environments may overcome information asymmetries in credit markets and consequently affect MFI funding policies. The results of this study suggest that creditor rights, a country’s legal tradition, and the level of financial‐sector development are significantly related to MFIs’ level of external finance (leverage and subsidized equity).…”

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

“…They mentioned that the grants are helpful for better depth of outreach; concessional loans are useful for improving outreach without affecting financial results. Tchuigoua [49] found that creditors' rights and financial sector development of a country influence the level of external funds for MFIs. Thus, if the financial sector is on a well-established foundation and obeys the rules, MFIs will have more access to external funding, and they will be complementary to the classic financial sector.…”