[PDF] Financial Performance And Outreach eBook

Author : Robert J. Cull
Publisher : World Bank Publications
Page : 51 pages
File Size : 50,16 MB
Release : 2006
Category : Bank loans
ISBN : 0601241630

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Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most microbanks. Profitability, though, is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy. The authors examine why this promise remains unmet for most institutions. Using a data set with unusually high quality financial information on 124 institutions in 49 countries, they explore the patterns of profitability, loan repayment, and cost reduction. The authors find that institutional design and orientation matter substantially. Lenders that do not use group-based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially. For these individual-based lenders, one key to achieving profitability is investing more heavily in staff costs-a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost.

Author : Robert Cull
Publisher :
Page : 51 pages
File Size : 27,19 MB
Release : 2016
Category :
ISBN :

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Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most microbanks. Profitability, though, is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy. The authors examine why this promise remains unmet for most institutions. Using a data set with unusually high quality financial information on 124 institutions in 49 countries, they explorethe patterns of profitability, loan repayment, and cost reduction. The authors find that institutional design and orientation matter substantially. Lenders that do not use group-based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially. For these individual-based lenders, one key to achieving profitability is investing more heavily in staff costs - a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost.

Author : Robert Cull
Publisher :
Page : pages
File Size : 45,81 MB
Release : 2012
Category :
ISBN :

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Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most microbanks. Profitability, though, is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy. The authors examine why this promise remains unmet for most institutions. Using a data set with unusually high quality financial information on 124 institutions in 49 countries, they explore the patterns of profitability, loan repayment, and cost reduction. The authors find that institutional design and orientation matter substantially. Lenders that do not use group-based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially. For these individual-based lenders, one key to achieving profitability is investing more heavily in staff costs-a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost.

Author : Sandra Kendo
Publisher :
Page : 32 pages
File Size : 24,19 MB
Release : 2018
Category :
ISBN :

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This paper investigates the MFI performance and outreach relationship and examine whether big banking principles also apply to microfinance institutions (MFIs) and may help explaining the above-mentioned link. Unlike previous work analyzing the relationship between financial performance and outreach, we apply conditional quantile regressions to grasp the differences observed across MFIs. Our study unveils that big banking principles can be extended to the microfinance sector. Indeed, we find that increasing assets improves performance among MFIs that already have large profits. We also find that an increase in assets induces less small loans.

Author : Julian Schmied
Publisher : Universitätsverlag Potsdam
Page : 70 pages
File Size : 10,53 MB
Release : 2014-12-01
Category :
ISBN : 3869562757

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Critics argue that there has been a trend among Microfinance Institutions (MFI) to focus on profitability in order to stay financially sustainable. This made some institutions neglect the social mission of microfinancing. In this paper I intend to examine if empirical evidence supports this so called mission drift hypothesis as well as other claims in this context. Using the global panel data set of the MIX (Microfinance Information Exchange), which gathers from 1995 to 2010 and contains up to 1400 institutions with a high variety of organizational forms, I was able to identify a world-wide mission drift effect in their social goal of reaching out the poorest part of the population. Furthermore, I find that, on average, the outreach of an MFI has a significant negative influence on its short and long term financial performance. Despite that, I eventually proved that the probability that an MFI worsens its social performance substantially increases if its profitability has decreased in the previous years.

Author : Bernd Balkenhol
Publisher : Palgrave Macmillan
Page : 194 pages
File Size : 31,10 MB
Release : 2007-12-15
Category : Business & Economics
ISBN : 9780230547025

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Microfinance institutions (MFIs) provide a public good: they provide income-creating financial services to un-bankable people. If MFIs create and deepen markets where none existed before, there may be a case for public support. While subsidies are generally not favorably seen in financial sector development, being difficult to target and possibly distorting the local financial market, there may be situations where the net social benefits of micro-finance may exceed those of not doing anything and of alternative anti-poverty programs. Under such circumstances longer-term public support may be justifiable. This book is based on a study of forty-five MFIs carried out by ILO, in partnership with the Universities of Geneva and Cambridge. The application of factor analysis and cluster analysis shows that MFIs form clusters in terms of social and performance. Within each cluster there is one institution that is most efficient on both scores. Public support should ensure that the relative efficiency of MFIs is enhanced, it should not prod MFIs to modify their mission and position between poverty outreach and profitability.

Author : Subham Kailthya
Publisher :
Page : 16 pages
File Size : 31,72 MB
Release : 2014
Category :
ISBN :

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Microfinance institutions (MFIs) in India are undergoing a structural change where previously donor driven, subsidy-reliant institutions are graduating into for-profit, publicly listed organizations. This necessitates a close examination of the nature of inter-relatedness between the MFIs' objectives of outreach and financial performance.A synthetic index, one for each dimension of performance - outreach and financial stability - is created for each MFI using factor analysis. The factor scores computed are then used as dependent variables in a Seemingly Unrelated Regression (SUR) framework to identify the determinants of performance.The results suggest that expansion of coverage and sustainable financial performance are strongly inter-connected objectives. While operational efficiency, leverage and institutional structure affect financial performance, outreach is driven by better aligned staff incentives, reduction in operational costs and ability to manage greater risks. A strong 'learning by doing' component is observed to exist in the microfinance industry.

Author : Andreas G. F. Hoepner
Publisher :
Page : 18 pages
File Size : 25,19 MB
Release : 2014
Category :
ISBN :

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While the relationship between outreach and financial performance (CFP) of microfinance institutions (MFIs) is increasingly well researched, next to nothing is known about the relationship between broader measure of corporate social responsibility (CSR) of MFIs and their CFP. In light of the social promise of microfinance, the relationship between corporate social performance (CSP) and corporate financial performance (CFP) is also very relevant. Based on in-depth social ratings conducted by MicroFinanza Rating, we investigate this relationship. We hypothesise that the relationship is parabolic instead of linear, as MFIs' funders and clients probably appreciate a degree of CSP but MFIs cannot devote all their cash to CSP. Specifically, we believe that external, competition oriented CSP indicator have an U-shaped relationship to CFP, while the relationship between CFP and internal, employee motivation oriented CSP indicators approximates an inverted U-shape. Our empirical results broadly confirm these hypotheses, whereby we find the convex relationship between competition oriented CSP and CFP to be more pronounced among for-profit MFIs. In contrast, the concave relationship between motivation oriented CSP and CFP appears to be stronger among non-profit MFIs. Our results imply that corporate social responsibility might be a crucial driver of MFI's financial success. Hence, MFIs, their investors and policy makers appear well advised to devote more attention to MFIs' corporate social responsibility.

Author : R. Mersland
Publisher : Springer
Page : 329 pages
File Size : 43,45 MB
Release : 2015-12-11
Category : Business & Economics
ISBN : 113739966X

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Research on MFI performance is still in its infancy. MFIs are hybrid organizations with dual objectives. Performance studies in microfinance are therefore less straightforward compared to performance studies in traditional banking research. This book contains new MFI performance research by top scholars from across the globe.

Author : Sanju Adhikary
Publisher :
Page : pages
File Size : 28,96 MB
Release : 2014
Category :
ISBN :

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We examine the relationship between financial sustainability and client outreach in microfinance institutions. Financial ratios are used to proxy financial performance. Outreach is captured in two dimensions, depth or how poor the clients are and breadth or how many people the program is reaching. This relationship is illustrated by a sample of south Asian micro finance institutions during the period 2003-2009. Using panel data, we show the evidence that breadth of outreach specified as total number of borrowers, does not have a significant impact on financial performance but depth of outreach measured as destitute women borrowers enhances profitability, efficiency and reduces portfolio delinquency risks, while controlling for other microfinance institutions and country specific characteristics. The results reveal that this relationship is stronger for regulated institutions, non bank financial institutions and non governmental organizations. The obtained results are confirmed by the series of robustness tests.