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Effect of Regulations on Financial Performance and Outreach of MFIs

Author

Listed:
  • Amin, Waqas
  • Qin, Fengming
  • Rauf, Abdul
  • Ahmad, Fayyaz

Abstract

The purpose of the study is to determine the effect of regulation status of MFIs on their financial performance and outreach. To find results, we used dataset of 413 MFIs over 21 Latin American Countries for the year 2005-2017. Using GMM, we found that regulated MFIs are more concerned for serving better off clients that decrease their cost per borrowing and improve financial performance. On the other side, unregulated MFIs also serve poor clients as they do not require to pay compliance cost. However, it increases their CPB that is compensated by serving better of clients. The findings are helpful for policy recommendations. Regulatory institutions must consider the cost of diminished level of outreach depth while valuing the benefits of regulation compliance with an eye to improve depositors’ protection and constancy of MFIs.

Suggested Citation

  • Amin, Waqas & Qin, Fengming & Rauf, Abdul & Ahmad, Fayyaz, 2018. "Effect of Regulations on Financial Performance and Outreach of MFIs," Public Finance Quarterly, Corvinus University of Budapest, vol. 63(3), pages 345-354.
    • Handle: RePEc:pfq:journl:v:63:y:2018:i:3:p:345-354
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    File URL: https://unipub.lib.uni-corvinus.hu/8732/
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    Cited by:

    1. Md Aslam Mia & Lucia Dalla Pellegrina & Wai‐Yan Wong, 2022. "Female participation and financial performance of microfinance institutions: Evidence from transition economies," Development Policy Review, Overseas Development Institute, vol. 40(5), September.

    More about this item

    Keywords

    Regulation; Outreach; Financial performance; Latin America;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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