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An Analysis of Organisational, Market and Socio-cultural Factors Affecting the Supply of Insurance and Other Financial Services by Microfinance Institutions in Developing Economies

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  • W Jean Kwon

    ()
    (School of Risk Management, St. John's University, 101 Murray Street, New York, NY 10007, U.S.A.)

Abstract

This article first investigates the microfinance—principally microinsurance—market at the global level and the business structure of over 600 microfinance institutions (MFIs) in 83 countries that were in operation during 1998–2007. It then empirically examines the impact of organisational, market and socio-cultural factors on the supply of insurance, lending and savings services by MFIs in developing countries. Findings from a series of probit analyses indicate that a rise in the financial expense ratio, loan repayments in arrears, years of operation, number of borrowers, woman borrower ratio, life insurance penetration ratio and family size positively affect MFIs’ willingness to expand their operations, certainly to microinsurance business. In contrast, they are likely to stay away from the insurance market when their loan asset ratio, bad loan write-off ratio or average loan size in comparison to GNI per capita is on the rise. It seems MFIs focus on lending service in Muslim populous countries. Finally, we find no evidence that presence of insurance affects availability of savings service, and vice versa, in the microfinance market.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Issues and Practice.

Volume (Year): 35 (2010)
Issue (Month): 1 (January)
Pages: 130-160

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Handle: RePEc:pal:gpprii:v:35:y:2010:i:1:p:130-160

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Cited by:
  1. Mirakhor, Abbas & Iqbal, Zamir, 2012. "Financial Inclusion: Islamic Finance Perspective," MPRA Paper 55977, University Library of Munich, Germany, revised 2012.
  2. Mohieldin, Mahmoud & Iqbal, Zamir & Rostom, Ahmed & Fu, Xiaochen, 2011. "The role of Islamic finance in enhancing financial inclusion in organization of Islamic cooperation (OIC) countries," Policy Research Working Paper Series 5920, The World Bank.

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