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Can Combined Microfinance Boost Economic Results? An Empirical Cross-sectional Analysis

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  • Koen Rossel-Cambier

    ()
    (Centre for European Research on Microfinance (CERMI) and Waroqu¨¦ Business School,Faculty of Economics and Business Management, University of Mons)

Abstract

Worldwide, microcredit organizations are gradually transforming to multi-servicing organizations offering additional financial services. This paper examines whether combining microcredit with insurance and/or savings enhances their economic performance measured by their efficiency, productivity, sustainability or portfolio quality indicators. Using cross-sectional data from 250 microfinance institutions (MFIs) from Latin America and the Caribbean, it compares MFIs offering credit only with those combining credit with respectively savings and/or insurance. A cross-sectional multiple regression analysis shows positive effects of both savings and insurance on the efficiency and productivity of MFIs. Taking into account various risks, this can be attributed to economies of scope, especially in a context of large and mature MFIs which exhibit organisational readiness. Surprisingly, the research didn't observe significant results relating to possible effects on the sustainability and portfolio quality of MFIs.

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Bibliographic Info

Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

Volume (Year): 2 (2012)
Issue (Month): (August)
Pages: 79-94

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Handle: RePEc:bap:journl:120307

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Related research

Keywords: Performance; Combined microfinance; Micro-insurance; Micro-savings;

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  1. Marc Labie, 2009. "Microfinance : évolutions du secteur, diversification de produits et gouvernance," Reflets et perspectives de la vie économique, De Boeck Université, De Boeck Université, vol. 0(3), pages 5-6.
  2. Pulley, Lawrence B & Humphrey, David B, 1993. "The Role of Fixed Costs and Cost Complementarities in Determining Scope Economies and the Cost of Narrow Banking Proposals," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 66(3), pages 437-62, July.
  3. Ioannidou, V. & Penas, M.F., 2008. "Deposit Insurance and Bank Risk-Taking: Evidence from Internal Loan Ratings," Discussion Paper, Tilburg University, Tilburg Law and Economic Center 2008-022, Tilburg University, Tilburg Law and Economic Center.
  4. Mersland, Roy & Strøm, Reidar Øystein, 2007. "Performance and corporate governance in microfinance institutions," MPRA Paper 3888, University Library of Munich, Germany.
  5. Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2006. "Financial performance and outreach : a global analysis of leading microbanks," Policy Research Working Paper Series, The World Bank 3827, The World Bank.
  6. Copestake, James, 2007. "Mainstreaming Microfinance: Social Performance Management or Mission Drift?," World Development, Elsevier, Elsevier, vol. 35(10), pages 1721-1738, October.
  7. Marc Labie & Marthe Nyssens & Pascal Wélé, 2007. "Microfinance et micro-assurance santé : réflexions sur des articulations possibles à partir de quelques expériences au Bénin et au Burkina Faso," Mondes en développement, De Boeck Université, De Boeck Université, vol. 0(3), pages 57-71.
  8. Ahlin, Christian & Jiang, Neville, 2008. "Can micro-credit bring development?," Journal of Development Economics, Elsevier, Elsevier, vol. 86(1), pages 1-21, April.
  9. Koen Rossel-Cambier, 2009. "La microfinance combinée : aperçu en Amérique latine et dans les Caraïbes," Reflets et perspectives de la vie économique, De Boeck Université, De Boeck Université, vol. 0(3), pages 85-97.
  10. Mark Schreiner, 2001. "Measuring Savings," Microeconomics, EconWPA 0108004, EconWPA, revised 27 Dec 2001.
  11. Jeffrey A. Clark, 1988. "Economies of scale and scope at depository financial institutions: a review of the literature," Economic Review, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, issue Sep, pages 16-33.
  12. Steven B. Caudill & Daniel M. Gropper & Valentina Hartarska, 2009. "Which Microfinance Institutions Are Becoming More Cost Effective with Time? Evidence from a Mixture Model," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 41(4), pages 651-672, 06.
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