Microfinance and competition for external funding

Ghosh, Suman; Tassel, Eric Van

doi:10.1016/j.econlet.2011.03.037

Cited by 45 publications

(27 citation statements)

References 6 publications

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“…The results coincide with Gutierrez-Nieto et al (2007) and Tchakoute-Tchuigoua (2010). A portion of the higher costs of the rural banks and NBFIs may be related with the lack of subsidized lines of credit and donations, increasing the cost of capital for these MFIs (Ghosh & Van Tassel, 2011). Another possibility is that the business model of for-profit MFIs, probably based on products and services from the traditional financial system, is less efficient for the microfinance market that that developed by NGOs and cooperatives, which adopt practices based on local customs and partnerships, thus reducing the cost of their operations.…”

Section: Efficiency Costs and Risksupporting

confidence: 66%

“…Even when MFIs have donations and subsidized resources, reducing costs enables a reduction in the rates and fees charged to customers, thus reducing any penalization of the poorest (Serrano-Cinca & Gutiérrez-Nieto, 2014) and, since the availability of donations and lines of credit with lower costs is not unlimited, the market prefers those MFIs that manage to maximize the benefits of the resources used and favors the most efficient ones (Ghosh & Van Tassel, 2011). Signs of efficiency are even more important in the context of microfinance due to the low savings ability of the customers, making MFIs more dependent on external funds (Serrano-Cinca & Gutiérrez-Nieto, 2014).…”

Section: Mfi Efficiencymentioning

confidence: 99%

“…The possibility is that a more costly operation that favors poorer and more expensive customers makes more creditors' resources available to MFIs and enables them to have a more financially leveraged structure. Ghosh and Van Tassel (2011) report that the most socially orientated MFIs are the ones that receive more subsidized funds and donations. In this case, the costs would be a reflection of social actions and the leveraged structure an incentive and a need for the activities of these MFIs.…”

Section: Efficiency Costs and Riskmentioning

confidence: 99%

“…One possible explanation is based on the fact that the availability of subsidized lines of credit is an incentive for MFIs to meet their social goals and one of these consists of causing the maximum impact in the local society and serving the greatest number of poor people possible (Ghosh & Van Tassel, 2011).…”

Section: Social Performancementioning

confidence: 99%

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The relationship between the performance and legal form of microfinance institutions

Costa

2017

Rev. contab. finanç.

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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.

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Section: Efficiency Costs and Risksupporting

confidence: 66%

Section: Mfi Efficiencymentioning

confidence: 99%

Section: Efficiency Costs and Riskmentioning

confidence: 99%

Section: Social Performancementioning

confidence: 99%

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The relationship between the performance and legal form of microfinance institutions

Costa

2017

Rev. contab. finanç.

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“…Higher interest rates would signal lower social concern (Ghosh and Van Tassel, 2011). Arguably, wealthier clients can afford to pay more for potentially riskier loans, whereas the poor cannot.…”

Section: Data and Resultsmentioning

confidence: 99%

Aid Volatility and Social Performance in Microfinance

D’Espallier

Hudon

Szafarz

2016

Nonprofit and Voluntary Sector Quarterly

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Uncertainty makes objectives harder to reach. This article examines whether uncertainty in subsidies leads to mission drift in microfinance institutions (MFIs). Using a worldwide sample of 1,151 MFIs active in 104 countries, we find that interest rates increase with aid volatility while average loan size (ALS) is inversely related to aid volatility. These results suggest that MFIs consider ALS as a signaling device for commitment to their social mission, but use interest rates as an adjustment variable to cope with uncertainty. The policy prescription to donor agencies wishing to curtail the rise in interest rates is to deliver subsidies predictably and transparently.

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