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An assessment of microfinance institutions’ social performance: evidence from worldwide panel data

An assessment of microfinance institutions’ social performance: evidence from worldwide panel data
An assessment of microfinance institutions’ social performance: evidence from worldwide panel data
A key of microfinance is to reach the poor with easy access to credit and small collateral. The evolution of microfinance has raised attention to researchers and academicians in analysing dual mission of Microfinance Institutions (MFIs); outreach to the poor and financial sustainability. However, some issues are not adequately addressed by the literature, which among them are gender issues, understanding of outreach and efficiency. This study discovered gender bias in MFIs that led this study to explore the drivers of social outreach to women. Besides, limitation in literature analysing different aspects of social performance motivate this study to explore different types of outreach and social efficiency. By employ longitudinal panel data of 10 years (2005 to 2015) of 2,330 operating MFIs across six regions (Sub-Saharan Africa, East Asia and Pacific, Eastern Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, and South Asia), this study analyse seven types of outreach, namely; outreach to women, breadth of outreach, depth of outreach, costs to users (worth of outreach), length of outreach, the scope of outreach by deposits, and scope of outreach by a loan. This study links the organisational characteristics (women managers, target market, legal ownership status, financial structure) with MFIs’ social outreach performance. The findings provide insight on gender bias of MFIs management practices as we find women managers are more inclined to reach women entrepreneurs among their borrowers, as compared to men managers. This study implies the vital role of gender composition across MFIs management level. Moreover, the results reveal that the impact of the financial instruments chosen by MFIs in the financial structure (assets, equity, borrowing and deposits) varies on its societal performance. This study finds MFIs that prefer conservative lending such as assets focusing on increasing borrowers through large-sized loans but less outreach to women. However, when external sources (borrowing and deposit) are brought in, MFIs attract a high proportion of women borrowers and focus on utilising both scopes of outreach (deposit account and loan portfolio). In correlation with social efficiency performance, this study find that MFIs are not reaching enough to the poor as there are controllable and uncontrollable factors influencing MFIs social efficiency of MFIs. Social inefficiencies of MFIs are originated from factors beyond the control of MFIs management, when they focus on depth, costs, length, and scope of outreach. These inefficiencies of MFIs arise mostly from external shocks such as related regulations and moral hazard issues in the rural populations, that caused waste and mismanagement of resources. Meanwhile, when MFIs focus on outreach to women and breadth of outreach, they rely on factors under the control of MFIs’ management such as operating costs and labour.
University of Southampton
Jasmi, Zarith Sofia Binti
949fbefe-32c7-4480-8613-05bcba6f8202
Jasmi, Zarith Sofia Binti
949fbefe-32c7-4480-8613-05bcba6f8202
Tamvada, Jagannadha Pawan
767d0374-3cc1-4822-adb6-f22b7a1f6531
Grinevich, Vadim
278ee424-e2bd-4df1-9844-e9f7563e3186

Jasmi, Zarith Sofia Binti (2020) An assessment of microfinance institutions’ social performance: evidence from worldwide panel data. University of Southampton, Doctoral Thesis, 163pp.

Record type: Thesis (Doctoral)

Abstract

A key of microfinance is to reach the poor with easy access to credit and small collateral. The evolution of microfinance has raised attention to researchers and academicians in analysing dual mission of Microfinance Institutions (MFIs); outreach to the poor and financial sustainability. However, some issues are not adequately addressed by the literature, which among them are gender issues, understanding of outreach and efficiency. This study discovered gender bias in MFIs that led this study to explore the drivers of social outreach to women. Besides, limitation in literature analysing different aspects of social performance motivate this study to explore different types of outreach and social efficiency. By employ longitudinal panel data of 10 years (2005 to 2015) of 2,330 operating MFIs across six regions (Sub-Saharan Africa, East Asia and Pacific, Eastern Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, and South Asia), this study analyse seven types of outreach, namely; outreach to women, breadth of outreach, depth of outreach, costs to users (worth of outreach), length of outreach, the scope of outreach by deposits, and scope of outreach by a loan. This study links the organisational characteristics (women managers, target market, legal ownership status, financial structure) with MFIs’ social outreach performance. The findings provide insight on gender bias of MFIs management practices as we find women managers are more inclined to reach women entrepreneurs among their borrowers, as compared to men managers. This study implies the vital role of gender composition across MFIs management level. Moreover, the results reveal that the impact of the financial instruments chosen by MFIs in the financial structure (assets, equity, borrowing and deposits) varies on its societal performance. This study finds MFIs that prefer conservative lending such as assets focusing on increasing borrowers through large-sized loans but less outreach to women. However, when external sources (borrowing and deposit) are brought in, MFIs attract a high proportion of women borrowers and focus on utilising both scopes of outreach (deposit account and loan portfolio). In correlation with social efficiency performance, this study find that MFIs are not reaching enough to the poor as there are controllable and uncontrollable factors influencing MFIs social efficiency of MFIs. Social inefficiencies of MFIs are originated from factors beyond the control of MFIs management, when they focus on depth, costs, length, and scope of outreach. These inefficiencies of MFIs arise mostly from external shocks such as related regulations and moral hazard issues in the rural populations, that caused waste and mismanagement of resources. Meanwhile, when MFIs focus on outreach to women and breadth of outreach, they rely on factors under the control of MFIs’ management such as operating costs and labour.

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Published date: October 2020

Identifiers

Local EPrints ID: 447792
URI: http://eprints.soton.ac.uk/id/eprint/447792
PURE UUID: ae7e1e0d-2503-4da2-8cc8-23db59307d60
ORCID for Zarith Sofia Binti Jasmi: ORCID iD orcid.org/0000-0003-3057-5916
ORCID for Jagannadha Pawan Tamvada: ORCID iD orcid.org/0000-0002-1225-3174
ORCID for Vadim Grinevich: ORCID iD orcid.org/0000-0002-3207-3680

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Date deposited: 22 Mar 2021 17:39
Last modified: 23 Jul 2022 02:08

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