Trade-off between outreach and sustainability of microfinance institutions: evidence from sub-Saharan Africa

Adams, Abdulai; Tewari, Devi Datt

doi:10.3362/1755-1986.16-00014

Cited by 35 publications

(30 citation statements)

References 46 publications

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“…It measures an institution's ability to generate sufficient revenue to cover its costs. It is a MIX Market standard indicator for financial performance and has been used as a proxy for financial sustainability in various studies [8,33,48,53,[61][62][63][64]. Achieving above 100% of OSS indicates that the institution is earning sufficient revenue from its operations to cover its costs.…”

Section: Dependent Variablementioning

confidence: 99%

Effect of Deposit Mobilization on the Financial Sustainability of Rural Saving and Credit Cooperatives: Evidence from Ethiopia

Duguma

Han

2018

Sustainability

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Increasing institutional capital through deposit mobilization keeps the cost of capital low, thus leading to financial sustainability. However, little is known about how deposit mobilization affects financial sustainability. Using balanced panel data of 166 rural savings and credit cooperatives (RUSACCOs) from Ethiopia over the period of 2014-2016, we investigated the effect of deposit mobilization on financial sustainability. The results of the panel regression estimates showed that, among the deposits mobilization variables, the deposit to loan ratio, deposit to total asset ratio, the volume of deposits, and demand deposit ratio had a significant direct impact on financial sustainability. The fixed effect regression result for interest rate spread showed that an inverse relationship existed between the interest rate spread and financial sustainability. Furthermore, according to our robust fixed effect regression results, among the control variables, the age of the institution and inflation rate affects financial sustainability. Contrary to our expectations, the number of members and the percentage of woman members were not significant. This may be attributed to the fact that some members were inactive for a long period. We suggest that RUSACCOs should focus on deposit mobilization specifically on demand deposits and keep the interest rate spread narrower to ensure their sustainability.

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Section: Dependent Variablementioning

confidence: 99%

Effect of Deposit Mobilization on the Financial Sustainability of Rural Saving and Credit Cooperatives: Evidence from Ethiopia

Duguma

Han

2018

Sustainability

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“…Furthermore, the Microfinance Transparency 2011 report notes that Zambia is an expensive place in which to carry out business activities including microfinance activities. Consequently, all MFI managers in this study noted that one of the challenges they face like other MFI managers in many other developing countries is that of reducing client transaction costs (Abdulai & Tewari, ; Kamel, ). Failure to do so threatens their financial viability and long‐term institutional sustainability.…”

Section: Overview Of Resultsmentioning

confidence: 92%

Computing for social good: Supporting microfinance institutions in Zambia

Wakunuma

Siwale

Beck

2019

E J Info Sys Dev Countries

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We investigate whether information and communication technologies (ICTs) can be used to achieve social good as they are implemented in microfinance institutions (MFIs) in Zambia. We find through information gathered from interviews with MFI officials that their organizations are focused primarily on survival in a competitive financial climate. Additionally, our findings reveal that most MFI business within the context of ICTs only promotes social good by default and not by design. This means that social good is not a primary mover or something that MFIs plan to achieve when they integrate ICTs into their business models but that it happens because of the assumed mission of primarily serving the informal sector small business and microbusiness and the low-income clients.

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“…The current literature has made some meaningful attempt in studying factors that might influence or even mitigate these symptoms of mission drift, such as prudential regulation and supervision on some specific issues (Abdulai & Tewari, 2017), government regulations on the corporate governance in the microfinance sector (Okoye et al, 2017), risk preference of loan officer (Jia, Cull, Guo, & Ma, 2016), loan portfolio design (Lopatta et al, 2017), and the influence of CEOs' gender (Hartarska, Nadolnyak, & Mersland, 2014) as well as the staff training and adequate incentive of loan officer (Aubert, Janvry, & Sadoulet, 2009) in MFIs on the tradeoff between financial sustainability and social goals. Although these meaningful attempts have been made, the extant studies on microfinance still do not answer fundamentally whether it is possible to balance the paradoxical nature of the dual missions of MFIs and if it is possible, how to balance the two conflicting missions of MFIs.…”

Section: A Critical Analysis Of the Three Modelsmentioning

confidence: 99%

Balancing Paradoxical Missions: How Does Microfinance Rebuild a Sustainable Path in Poverty Alleviation?

Wang

Ran

2019

SAGE Open

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As an effective means in fighting poverty, microfinance experienced an unprecedented growth in many emerging economies followed by stagnation and deep crisis, due to an inherent paradox in the fundamental missions of microfinance industry: serving the poor and making profits to maintain institutional sustainability. This article explored sustainable mechanisms in balancing the paradoxical missions of microfinance institutions in the post-crisis era through an in-depth case study on RSL, a microfinance institution in China. The managerial principles and framework of RSL revealed in this article could guide indigenous microfinance companies to deal with the paradoxical nature of their missions and build a sustainable path in poverty alleviation.

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Trade-off between outreach and sustainability of microfinance institutions: evidence from sub-Saharan Africa

Cited by 35 publications

References 46 publications

Effect of Deposit Mobilization on the Financial Sustainability of Rural Saving and Credit Cooperatives: Evidence from Ethiopia

Effect of Deposit Mobilization on the Financial Sustainability of Rural Saving and Credit Cooperatives: Evidence from Ethiopia

Computing for social good: Supporting microfinance institutions in Zambia

Balancing Paradoxical Missions: How Does Microfinance Rebuild a Sustainable Path in Poverty Alleviation?

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