scholarly journals Determinants of microfinance outreach in Sub-Saharan Africa: A panel approach

2017 ◽  
Vol 17 (1) ◽  
Author(s):  
Abdulai Adams ◽  
Devi D. Tewarib
Keyword(s):  
Financial Services ◽  
Value Added ◽  
Sub Saharan Africa ◽  
Microfinance Institutions ◽  
Trade Off ◽  
Access To Credit ◽  
The Poor ◽  
Institutional Determinants ◽  
Managerial Implications ◽  
Sub Saharan

Orientation: The study focused on analysing the outreach performance of microfinance institutions (MFIs) in providing critical services for the poor using innovative lending techniques within constrained environments. Research purpose: The study examined the trade-off relations between the depth and the breadth of outreach and identified institutional level factors that influence MFIs outreach in sub-Saharan Africa (SSA). Motivation for the study: MFIs continue to play critical roles in extending financial services to the poor and yet previous studies have not analysed comprehensively the dimensions of outreach necessary for financial inclusion. Research design, approach and methods: The study employed correlation analysis and random effects methodology to panel data regression analysis (619 observations, 71 MFIs across 10 countries) to establish the trade-off relations and the determinants of outreach in SSA. Main findings: It was established that a trade-off exists between the depth of outreach (access to credit disbursement by poor clients) and breadth of outreach (number of clients served). The results further revealed that gross loan portfolio, portfolio at risk, borrower per staff member, interest rate, and operating expenses to assets ratio are the main institutional determinants of MFIs outreach in SSA. Practical/managerial implications: The policy implication is that MFIs that concentrate efforts in reaching the relatively poor do so at the expense of reaching a large number of poor clients. We suggest that effective monitoring of depth and breadth and the adoption and implementation of cost-saving outreach technologies by MFIs could enable them to operate sustainably and efficiently. Contribution/value added: A major contribution of the study is the trade-off relations revealed between the depth of outreach and the breadth of outreach of MFIs which advances the outreach literature.

scholarly journals Microfinance Complementarity and Trade-Off between Financial Performance and Social Impact

2015 ◽  
Vol 7 (11) ◽  
pp. 128 ◽  
Author(s):  
Trong V. Ngo
Keyword(s):  
Financial Performance ◽  
Financial Services ◽  
Poverty Reduction ◽  
Social Impact ◽  
Economies Of Scale ◽  
Generalized Method Of Moments ◽  
Microfinance Institutions ◽  
Trade Off ◽  
The Poor ◽  
Trade Offs

There is a widespread belief that providing access to financial services (microfinance) or reaching the poor with microcredit are perfect solutions to establish a sustainable economy or to help kick-start a bottom-up recovery and social development animated by the poor themselves through self-employment and microenterprises. Microfinance has therefore become an important instrument for poverty alleviation and for improving the welfare of the poor in both developing and transition economies. Due to the difficulty of targeting the poor, who have a lack of collateral, microfinance institutions (MFIs) are called on to achieve a balance between social impact (poverty reduction) and positive financial performance. This paper assumes that the financial objectives of MFIs operate in opposition to each other and that a trade-off is inevitable. Unbalanced panel data of MFIs for the period 1995-2013 has been extracted from the MIX Market website. In order to solve the endogeneity problem, this paper employed the dynamic system GMM (generalized method of moments) of Blundell and Bond (1998) that is considered as the new methodology currently in use in the empirical investigation of the financial performance in banking and finance. This paper outlines some of the parameters that affect the nature of trade-offs and complementarities between social and financial objectives in microfinance performance, and provides empirical evidence from cross-country analysis. Sustainability has a positive link with outreach. MFIs tend to expand their outreach in order to achieve sustainability, based on the advantages of the economies of scale. However, a threshold which makes the trade-offs or complementarities between financial and social objectives reverse if it goes beyond a certain point is also observed.

Do microsavings stimulate financial performance of microfinance institutions in Sub-Saharan Africa?

2018 ◽  
Vol 45 (5) ◽  
pp. 1072-1087 ◽  
Author(s):  
Sydney Chikalipah
Keyword(s):  
Financial Performance ◽  
Financial Services ◽  
Information Exchange ◽  
Empirical Relationship ◽  
Policy Implications ◽  
Sub Saharan Africa ◽  
Microfinance Institutions ◽  
Data Set ◽  
Content Type ◽  
Sub Saharan

Purpose The purpose of this paper is to investigate the empirical relationship between microsavings and the financial performance of microfinance institutions (MFIs) in Sub-Saharan Africa (SSA). Design/methodology/approach The approach in this paper is decidedly empirical, and employs data obtained from Microfinance Information eXchange (MIX). The data set consists of 350 microfinance MFIs domiciled in 36 Sub-Saharan African countries for the period covering 1998–2012. Findings The panel estimation results consistently show that there exists a negative and statistically significant relationship between microsavings and the financial performance of MFIs in SSA. This is perhaps surprising, albeit rational considering the exceedingly elevated operating expenses that ascend from mobilizing and managing microsavings, ceteris paribus, that could erode firm profitability. The paper draws policy implications from these important findings. Research limitations/implications Even though generalized method of moment estimation technique was employed and robustness checks, the issue of endogeneity cannot be eliminated entirely. Practical implications Microfinance industry is one of the fastest growing segments of the financial sector in SSA. The industry is increasingly becoming the core of financial inclusion in the region where two-thirds of the adult population lack access to formal financial services. Therefore, gaining an in-depth understanding of the role microsavings play in the financial performance of MFIs can contribute to the growth of the industry. Originality/value This study is timely considering the significant growth in the number of microsavings – there are currently twice as many microsavings accounts in SSA as there are microcredits. More importantly, based on 400 MFIs, that reported data to MIX in 2016, the total microsavings stood at about US$11bn against an aggregate loan portfolio of about US$10.5bn. The remarkable growth of microsavings in SSA, from less than US$100m in 2000 to US$11bn in 2016, is the main motivation of undertaking this study.

scholarly journals Financial Inclusion, Income Inequality and Sustainable Economic Growth in Sub-Saharan African Countries

2021 ◽  
Vol 13 (4) ◽  
pp. 1780
Author(s):  
Chima M. Menyelim ◽  
Abiola A. Babajide ◽  
Alexander E. Omankhanlen ◽  
Benjamin I. Ehikioya
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Financial Services ◽  
Sub Saharan Africa ◽  
Kuznets Curve ◽  
African Countries ◽  
Financial Access ◽  
Sub Saharan ◽  
Sustainable Economic Growth ◽  
The Impact

This study evaluates the relevance of inclusive financial access in moderating the effect of income inequality on economic growth in 48 countries in Sub-Saharan Africa (SSA) for the period 1995 to 2017. The findings using the Generalised Method of Moments (sys-GMM) technique show that inclusive financial access contributes to reducing inequality in the short run, contrary to the Kuznets curve. The result reveals a negative effect of financial access on the relationship between income inequality and economic growth. There is a positive net effect of inclusive financial access in moderating the impact of income inequality on economic growth. Given the need to achieve the Sustainable Development Targets in the sub-region, policymakers and other stakeholders of the economy must design policies and programmes that would enhance access to financial services as an essential mechanism to reduce income disparity and enhance sustainable economic growth.

scholarly journals Microfinance institutions’ operational self-sufficiency in sub-Saharan Africa: empirical evidence

2021 ◽  
Vol 6 (1) ◽  
Author(s):  
Laxmi Remer ◽  
Hanna Kattilakoski
Keyword(s):  
Empirical Evidence ◽  
Cost Management ◽  
Sub Saharan Africa ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Return On Assets ◽  
Industry Development ◽  
Management Measures ◽  
Self Sufficiency ◽  
Sub Saharan

AbstractThe topic of financial sustainability in microfinance institutions has become more important as an increasing number of Microfinance Institutions (MFIs) seek operational self-sufficiency, which translates into financial sustainability. This study aims to identify factors that drive operational self-sufficiency in microfinance institutions. To accomplish this, 416 MFIs in sub-Saharan Africa are studied and several drivers for operational self-sufficiency are empirically analyzed. Results indicate that these drivers are return on assets, and the ratios total expenses/assets and financial revenues/assets. The results imply that MFIs should encourage cost-management measures. They also reveal that there may not be a significant tradeoff in self-sufficiency and outreach. These findings will enable microfinance institutions worldwide to sharpen their institutional capabilities to achieve operational self-sufficiency and also provide policymakers with more focused tools to assist industry development.

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