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Impact of MFIs Outreach on Profitability – The Case of Latin America

Author

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  • Amin, Waqas
  • Qin, Fengming
  • Rauf, Abdul
  • Ahmad, Farid

Abstract

This study attempts to determine whether MFIs can achieve financial sustainability while instantaneously reaching to the poorest to render financial services. To deal with methodological issues in previous studies due to the use of OLS, we used generalized method of moment (GMM) technique that is the most sophisticated technique while dealing with dynamic data. The selected sample consists of 405 MFIs across 21 Latin American countries for the period of ten years from 2005 to 2014. The results indicate compatible relation of depth of outreach (ALB) with profitability and breadth of outreach measured with number of active borrowers (NOAB) shows negative impact on profitability, though the results are insignificant. However, using GMM, we found compatible relation of ALB and NOAB with profitability. This study may be very helpful for policy development which may deliver treasured understandings to verbalize the future policy concerning to the revolutionary progression of MFIs.

Suggested Citation

  • Amin, Waqas & Qin, Fengming & Rauf, Abdul & Ahmad, Farid, 2017. "Impact of MFIs Outreach on Profitability – The Case of Latin America," Public Finance Quarterly, Corvinus University of Budapest, vol. 62(3), pages 348-361.
    • Handle: RePEc:pfq:journl:v:62:y:2017:i:3:p:348-361
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    File URL: https://unipub.lib.uni-corvinus.hu/8768/
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    Cited by:

    1. Lucas Lopes Ferreira de Souza & Francesca Bassi & Ana Augusta Ferreira de Freitas, 2021. "Longitudinal analysis of microfinance borrowers in Brazil: A dynamic market segmentation," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(6), pages 1063-1083, August.

    More about this item

    Keywords

    outreach; profitability; Latin America; dynamic panel data analysis;
    All these keywords.

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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