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Financial Sustainability and Poverty Outreach: The Case of Microfinance Institutions in Eastern Europe and Central Asia

Author

Listed:
  • Ganna Sheremenko

    (The University of Georgia)

  • Cesar L Escalante

    (The University of Georgia)

  • Wojciech J Florkowski

    (The University of Georgia)

Abstract

The collapse of state ownership, following the dissolution of the Soviet Union, launched a new era of self-employment and small businesses in need of financing services throughout the region. This research investigates whether the traditional microfinance lending paradigm that adopts a two-pronged mission of financial sustainability and poverty outreach applies to young commercialized microfinance institutions in Eastern Europe and Central Asia. The analysis employs a residual standard error approach to ordinary least squares and 2-stage least squares estimation, as well as recursive model estimation. The results suggest that financial sustainability can be adversely affected when interest rates exceed a threshold of 80 per cent and an individualized instead of group lending approach is adopted. However, poverty outreach is improved by servicing small loans to more borrowers, particularly women.

Suggested Citation

  • Ganna Sheremenko & Cesar L Escalante & Wojciech J Florkowski, 2017. "Financial Sustainability and Poverty Outreach: The Case of Microfinance Institutions in Eastern Europe and Central Asia," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 29(1), pages 230-245, January.
    • Handle: RePEc:pal:eurjdr:v:29:y:2017:i:1:d:10.1057_ejdr.2016.12
    DOI: 10.1057/ejdr.2016.12
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    References listed on IDEAS

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    2. Dawood Ashraf & Muhammad Suhail Rizwan & Barbara L’Huillier, 2022. "Environmental, social, and governance integration: the case of microfinance institutions," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 837-891, March.
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    4. Vien Chu & Belinda Luke, 2021. "Understanding success in micro‐enterprise development: Dimensions and misconceptions," Public Administration & Development, Blackwell Publishing, vol. 41(2), pages 63-78, May.
    5. Batoul Modarress & Alexander Ansari & Al Ansari, 2020. "Sustainable Development and Ecological Deficit in the United Arab Emirates," Sustainability, MDPI, vol. 12(15), pages 1-19, July.

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