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Lending and business cycle: Evidence from microfinance institutions

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  • Tchakoute Tchuigoua, Hubert
  • Soumaré, Issouf
  • Hessou, Hélyoth T.S.

Abstract

Analyzing a sample of 5996 firm-year observations from 1444 microfinance institutions (MFIs) worldwide over the 2001–2014 period, we find evidence that the cyclical behavior of MFIs’ lending documented in previous literature is not homogenous across MFI regulated status and lending categories. Among other things we find evidence that regulated MFIs (mostly comprised of privately-owned-MFIs) drive the cyclical behavior of lending in the microfinance industry. This might be due to regulatory pressures and the high exposure of these MFIs to economic uncertainties. Business cycles affect non-regulated and pro-poor MFIs to a lesser degree. Additionally, our findings reveal that individual loan contracts are more pro-cyclical than group loan contracts.

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  • Tchakoute Tchuigoua, Hubert & Soumaré, Issouf & Hessou, Hélyoth T.S., 2020. "Lending and business cycle: Evidence from microfinance institutions," Journal of Business Research, Elsevier, vol. 119(C), pages 1-12.
    • Handle: RePEc:eee:jbrese:v:119:y:2020:i:c:p:1-12
    DOI: 10.1016/j.jbusres.2020.07.022
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    2. Hartarska, Valentina M. & Zhang, Jingfang & Nadolnyak, Denis A., 2023. "Scope Economies from Rural and Urban Microfinance Services," 2023 Annual Meeting, July 23-25, Washington D.C. 335439, Agricultural and Applied Economics Association.
    3. Mohamed, Toka S. & Elgammal, Mohammed M., 2023. "Credit risk in Islamic microfinance institutions: The role of women, groups, and rural borrowers," Emerging Markets Review, Elsevier, vol. 54(C).
    4. Hessou, Hélyoth T.S. & Lensink, Robert & Soumaré, Issouf & Tchakoute Tchuigoua, Hubert, 2021. "Provisioning over the business cycle: Some insights from the microfinance industry," International Review of Financial Analysis, Elsevier, vol. 77(C).
    5. Francis Lwesya & Adam Beni Swebe Mwakalobo, 2023. "Frontiers in microfinance research for small and medium enterprises (SMEs) and microfinance institutions (MFIs): a bibliometric analysis," Future Business Journal, Springer, vol. 9(1), pages 1-18, December.
    6. Valentina Hartarska & Jingfang Zhang & Denis A. Nadolnyak, 2023. "Scope economies from rural and urban microfinance services," Southern Economic Journal, John Wiley & Sons, vol. 89(4), pages 1138-1167, April.
    7. Tchakoute Tchuigoua, Hubert & Simo, Christelle & Durrieu, François, 2022. "Business cycle and cash holdings: Empirical evidence from microfinance institutions," Finance Research Letters, Elsevier, vol. 50(C).

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    More about this item

    Keywords

    Microfinance; Lending; Business cycle;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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