Surplus distribution and characteristics of social enterprises: Evidence from microfinance

Hudon, Marek; Périlleux, Anaïs

doi:10.1016/j.qref.2013.10.002

Cited by 26 publications

(21 citation statements)

References 42 publications

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“…In line with prior research that demonstrates a significant relationship between MFIs' portfolio at risk as well as their operational self‐sufficiency and MFIs' financial performance (Arnone et al ., ; Kumar and Gupta, ), PAR30 is significantly negatively and OSS is significantly positively related to GDP growth. The significant and positive effect of MFIs' gross loan portfolio (GLP/TA) is in line with the work of Hudon and Périlleux () as well as Mersland and Strøm (), and indicates that larger MFIs not only perform better than smaller ones in terms of their social and financial achievements, but also have a larger contribution to GDP growth. Also in line with prior research (see, for example, Hermes et al ., ; Koivulehto, ), MFIs' age (MAT) has a significant negative regression coefficient, demonstrating that MFIs' social and financial performance as well as their contribution to GDP growth declines with their age.…”

Section: Resultssupporting

confidence: 84%

Sustainable Development and Microfinance: The Effect of Outreach and Profitability on Microfinance Institutions' Development Mission

Lopatta

Tchikov

Jaeschke

et al. 2017

Sustainable Development

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According to the concept of microfinance, financial institutions ought to contribute to sustainable economic and financial systems development by offering access to credit for clients who are usually excluded from the formal banking system. However, in recent decades microfinance institutions (MFIs) have often focused on their profitability rather than the support of their poor clients. In order to empirically examine this mission drift and its consequences for MFIs' performance, we propose a model of MFIs' contribution to sustainable development as dependent on their outreach and profitability focus measured by percentages of female borrowers and profit margins, respectively. Utilizing a large transnational panel data set comprised of institutional and country‐specific data, we provide preliminary empirical evidence indicating that both extensive outreach and profitability are negatively related to development. The model further highlights that the problem of a mission drift is especially pronounced for non‐profit‐oriented MFIs. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment

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Section: Resultssupporting

confidence: 84%

Sustainable Development and Microfinance: The Effect of Outreach and Profitability on Microfinance Institutions' Development Mission

Lopatta

Tchikov

Jaeschke

et al. 2017

Sustainable Development

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“…Further research could investigate how female top managers influence the social performance of hybrid institutions in both developed and developing countries. 33 In addition, the governance of cooperatives is more complex than that of for-profit firms (Cornforth, 2004;Hudon and Périlleux, 2014). In particular, aside from securing the financial sustainability of the whole network, the objectives of the CU are not clear-cut.…”

Section: Resultsmentioning

confidence: 99%

Women Leaders and Social Performance: Evidence from Financial Cooperatives in Senegal

Périlleux

Szafarz

2015

World Development

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How do women leaders such as board members and top managers influence the social performance of organizations? This paper addresses the question by exploiting a unique database from a Senegalese network of 36 financial cooperatives. We scrutinize the loan-granting decisions, made jointly by the locally elected board and the top manager assigned by the central union of the network. Our findings are threefold. First, female-dominated boards favor social orientation. Second, female managers tend to align their strategy with local boards' preferences. Third, the central union tends to assign male managers to female-dominated boards, probably to curb the boards' social orientation.

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“…They conclude that it is up to policymakers to decide whether NGOs should be allowed to mobilize savings and become regulated without changing their ownership status. Hudon and Périlleux (2014) analyze the surplus distribution of MFIs and find that NGOs and shareholder-firm MFIs do not allocate their surplus in a significantly different way. Looking at the other dimension of transformation, Hartarska and Nadolnyak (2007) find that regulation neither affects social performance (measured by outreach), nor does it affect financial performance (measured by operational sustainability).…”

Section: Cross-country Empirical Evidence Of the Relation Between Finmentioning

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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Surplus distribution and characteristics of social enterprises: Evidence from microfinance

Cited by 26 publications

References 42 publications

Sustainable Development and Microfinance: The Effect of Outreach and Profitability on Microfinance Institutions' Development Mission

Sustainable Development and Microfinance: The Effect of Outreach and Profitability on Microfinance Institutions' Development Mission

Women Leaders and Social Performance: Evidence from Financial Cooperatives in Senegal

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

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