Title

Financial Performance of Microfinance Institutions-A Macroeconomic and Institutional Perspective

Abstract

This study investigates the effect of both institutional factors and the macro economy on the financial performance of MFIs. Drawing upon the Microfinance Information Exchange data and cross-country data on macro economy, finance and institutions, we use three stage least squares and Hausman-Taylor to take account of endogeneity. We find that institutional factors affect MFIs' financial performance, in particular, profitability, operating expense, and portfolio quality. Also, GDP and share of domestic credit to GDP have positive impacts on MFIs' financial performance. Hence policies to raise country-level institutional qualities are required for making the activities of MFIs sustainable.

Keywords

Microfinance, Financial Performance, Macro economy and Institutions

Inquiries

Katsushi S. IMAI
Economics, School of Social Sciences, University of Manchester, UK
and
Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059

Raghav GAIHA
Faculty of Management Studies, University of Delhi, India

Ganesh THAPA
International Fund for Agricultural Development, Italy

Samuel Kobina ANNIM
Lancashire Business School, University of Central Lancashire, UK
and
Department of Economics, University of Cape Coast, Ghana

Aditi GUPTA
Yes Bank, Mumbai