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Microfinance financial sustainability and outreach: is there a trade-off?

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  • Sefa Awaworyi Churchill

    (RMIT University)

Abstract

The financial sustainability of microfinance institutions (MFIs) is crucial for the continual existence of the microfinance industry. As a result, emphasis has been placed on the financial sustainability of MFIs over the past few years. However, with the primary goal of the industry being the attainment of social outreach, the emphasis on financial sustainability has raised concerns about a potential adverse effect on outreach. Using data on 1595 MFIs in 109 countries, we examine if there is a trade-off between financial sustainability and outreach. The evidence shows that there is a trade-off between sustainability and outreach depth, but complementarity between sustainability and outreach breadth.

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  • Sefa Awaworyi Churchill, 2020. "Microfinance financial sustainability and outreach: is there a trade-off?," Empirical Economics, Springer, vol. 59(3), pages 1329-1350, September.
    • Handle: RePEc:spr:empeco:v:59:y:2020:i:3:d:10.1007_s00181-019-01709-1
    DOI: 10.1007/s00181-019-01709-1
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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.
    3. Md Aslam Mia & Lucia Dalla Pellegrina & Cheng Zhang & Sunil Sangwan, 2022. "Efficiency Wage and Productivity in the Indian Microfinance Industry: A Panel Evidence," IIM Kozhikode Society & Management Review, , vol. 11(2), pages 235-252, July.
    4. Ponce, L. Arturo Bernal & Rocha, Adriana Ramírez & Navarro, Ricardo Pérez, 2021. "A causality approach in the analysis of the trade-off between financial sustainability and outreach," Finance Research Letters, Elsevier, vol. 42(C).
    5. Al-Azzam, Moh'd & Mimouni, Karim & Smaoui, Houcem & Temimi, Akram, 2022. "Subsidies vs. deposits and cost inefficiency in microfinance," Journal of Economic Behavior & Organization, Elsevier, vol. 198(C), pages 212-235.
    6. Gallego-Losada, María-Jesús & Montero-Navarro, Antonio & García-Abajo, Elisa & Gallego-Losada, Rocío, 2023. "Digital financial inclusion. Visualizing the academic literature," Research in International Business and Finance, Elsevier, vol. 64(C).
    7. Emmanuel Ofori & Kenichi Kashiwagi, 2022. "Impact of Microfinance on the Social Performance of Local Households: Evidence from the Kassena Nankana East District of Ghana," Sustainability, MDPI, vol. 14(10), pages 1-25, May.

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    More about this item

    Keywords

    Microfinance; Outreach; Sustainability; Profitability;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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