The determinants of MFIs’ social and financial performances in sub-Saharan Africa: has mission drift occurred?

Arrassen, Wassini

doi:10.1007/s10436-017-0296-x

Cited by 13 publications

(8 citation statements)

References 18 publications

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“…They suggested that such MFIs can improve their financial health by focussing on operational efficiency. Arrassen (2017) finds that the ongoing commercialisation of microfinance sector neither improves the outreach of MFIs nor materially improves their financial performance. Kittilaksanawong and Zhao (2018) find that lending to women borrowers adversely affects the financial health of MFIs.…”

Section: Literature Reviewmentioning

confidence: 94%

Social and financial performance of MFIs: complementary or compromise?

Navin

Sinha

2020

XJM

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Purpose With the ongoing transformation of the microfinance sector, questions have been raised on the ability of microfinance institutions (MFIs) to perform financially well without compromising with their social objectives. The current study attempts to analyse the social and financial performance of Indian MFIs with an objective to find the kind of relationship between these two objectives. Design/methodology/approach The dynamic framework of simultaneous equations model is used to find the nature of the relationship which exists between social and financial performance of Indian MFIs. Findings The study finds that depth of outreach enables MFIs to achieve financial sustainability. On the other hand, financially strong MFI lend more as reflected by an increase in their average loan size. Research limitations/implications Many MFIs still receive subsidies to support their operations. Ideally, adjustments should be made to remove the effect of such subsidies on their cost. However, due to non-availability of data, the study fails to make any adjustment for the subsidies. Practical implications The presence of a complementary relationship between social and financial performance in the Indian microfinance sector is quite encouraging for the policymakers during the current time when the sector is becoming less dependent on subsidies. However, the recent upsurge in the average loan size requires attention. Social implications The findings suggest that MFIs can achieve financial sustainability while targeting poor clients. This indicates that MFIs can perform socially good along with their financial performance. Originality/value Such study is vital when the Indian microfinance sector is moving away from subsidies to become self-reliant and commercialised. Few studies have focused on this aspect of Indian microfinance sector.

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Section: Literature Reviewmentioning

confidence: 94%

Social and financial performance of MFIs: complementary or compromise?

Navin

Sinha

2020

XJM

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“…ROA as a proxy of FP to gauge profitability calculated as the ratio of net operating income and total assets (Abdullah & Quayes, 2016;Arrassen, 2017;Assefa, Hermes, & Meesters, 2013;Mersland & Strøm, 2009;Meyer, 2019;Rosenberg, 2009) ROA signals MFPs' capabilities of producing sound rate of returns that can keep the investors satisfied and of survival as to be in the business of microfinance (Adhikary & Papachristou, 2014). Profitability can be translated as a gesture of institutional logic dominance whereas the lower levels can be a sign of welfarist approach followed by MFPs (Im & Sun, 2015).…”

Section: Variables 321 Dependent Variablesmentioning

confidence: 99%

“…YLD can serve the function of proxy of FP of MFPs representing the nominal income earned from interest rates and fees charged by the MFPs on the loan portfolio outstanding (Abdullah & Quayes, 2016;Arrassen, 2017;Kulkarni, 2017;Meyer, 2019). YLDR is an the ex-ante proxy of interest rates that shows the total income from real interest rates and fees charged by the MFPs on the loan portfolio outstanding, used as measure of FP of MFPs (Abdullah & Quayes, 2016;Arrassen, 2017;Assefa et al, 2013;Robert Cull & Morduch, 2007;Kulkarni, 2017;Meyer, 2019)…”

Section: Variables 321 Dependent Variablesmentioning

confidence: 99%

“…PAR30 shows the quality of loan portfolio, and it is used as control variable because the payment overdue risk of portfolio for more than 30 days affects the FP of MFPs (Bassem, 2012). operating expenses to average gross loan portfolio ratio measures the efficiency of MFPs and also affects its FP, which means how much has been spent for lending one unit of loan (Arrassen, 2017;Assefa et al, 2013;Bibi et al, 2018;Gutierrez-Nieto, Serrano-Cinca, & Molinero, 2007;Kulkarni, 2017;Tchakoute-Tchuigoua, 2010). Debt equity ratio is used to control the effect of leverage of MFPs because the financial structures of an MFPs influence its financial performance (Agarwal & Sinha, 2010;Conning, 1999;Gutierrez-Nieto et al, 2007;Meyer, 2019;Quayes, 2012).…”

Section: Control Variablesmentioning

confidence: 99%

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The Impact of Social Outreach on the Financial Performance of Microfinance Providers in Pakistan

2019

EJBM

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Microfinance, the tool for poverty alleviation had gone through a paradigm shift as a result of the wave of commercialization of microfinance providers. Increased focus to financial goals and the dreaded trade-off from the pursuance of social outreach goals could force microfinance service providers (MFPs) to the mission drift. To solve the entangled puzzle of mutuality between the social outreach and financial performance of MFPs in Pakistan, this study empirically analyses the impact of outreach on financial performance of MFPs in Pakistan by using a sample of 38 MFPs for the period of 1998-2014. Results suggest that there is significant and positive association between depth of outreach and financial performance. The empirical evidence signaled no trade-off between depth of outreach and financial performance. Results showed the achievement of dual mission for MFPs is possible, as the depth of outreach had a significant positive effect on the financial performance of MFPs in the context of Pakistan. Findings remain consistent by using alternative proxies of financial performance.

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“…Ayayi, &Sene (2010) used a sample of 217 MFIs from 101 countries to study the determinants of MFI financial sustainability. Arrassen (2017) recently used a sample of 120 MFIs, drawn from the World Bank MIX database for the period 2000-2009, to analyse the determinants of their financial performance. However, the two studies did not include financing structures.…”

Section: Introductionmentioning

confidence: 99%

Capital structure and financial sustainability of Microfinance Institutions (MFIs) in Rwanda

Rutanga¹,

Barayandema²,

Mutarindwa³

2021

rjsshb

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The aim of this study was to assess the effect of capital structure on financial sustainability of microfinance institutions (MFIs), and find out the extent to which capital structure affects financial sustainability of MFIs in Rwanda. Data was collected from annual financial reports of MFIs and SACCOs for the period 2014-2018. Due to data availability, only a panel of 20 MFIs and SACCOs was considered using fixed effects OLS regression models. Findings from this study reveal that the use of debt as financing sources adversely affects firms‘ financial self-sufficiency and performance. In contrast, the use of share capital strongly improves firms‘ operational and financial sustainability as well as their return on assets. Using retained earnings moderately and positively increases firm‘s financial sustainability. Results from sample splits show that compared to MFIs, SACCOs are more likely to be adversely affected by debt financing than their MFI counterparts. With respect to share capital, there is significant difference between the two groups. Using share capital to finance MFIs‘ investments significantly increases their return on assets, their operational and financial self-sufficiency. With respect to SACCOs, results show that using share capital as means of financing firms‘ assets negatively and significantly affects their return on total assets as well as their operating and financial self-sufficiency.

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The determinants of MFIs’ social and financial performances in sub-Saharan Africa: has mission drift occurred?

Cited by 13 publications

References 18 publications

Social and financial performance of MFIs: complementary or compromise?

Social and financial performance of MFIs: complementary or compromise?

The Impact of Social Outreach on the Financial Performance of Microfinance Providers in Pakistan

Capital structure and financial sustainability of Microfinance Institutions (MFIs) in Rwanda

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