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Management of microfinance institutions: Do subsidies matter?

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  • Marek Hudon

    (CERMi, Université libre de Bruxelles, Belgium and Burgundy School of Business, France)

Abstract

It is estimated that donors commit between US$ 800 million and US$ 1 billion to microfinance per year. This paper analyses the management of microfinance institutions (MFIs) and its relationship with donors' subsidies. The results show that the level of subsidies granted per year is related to the management quality but not the subsidies divided by the gross loan portfolio or the total equity. Well-managed MFIs are larger and regulated organisations but not significantly older. The organisational structure or the experience of the MFI however does not play a role in determining its financial effectiveness, except for cooperatives. Copyright © 2009 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jid.1639
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 22 (2010)
Issue (Month): 7 ()
Pages: 890-905

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Handle: RePEc:wly:jintdv:v:22:y:2010:i:7:p:890-905

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Web page: http://www3.interscience.wiley.com/journal/5102/home

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References

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  1. Marc Labie & Anaïs Périlleux, 2008. "Corporate governance in microfinance: credit unions," Working Papers CEB 08-003.RS, ULB -- Universite Libre de Bruxelles.
  2. Mersland, Roy & Strøm, R. Øystein, 2007. "Microbanks: Ownership, performance and social tradeoffs - a global analysis," MPRA Paper 2063, University Library of Munich, Germany.
  3. Niels Hermes & Robert Lensink, . "The empirics of microfinance: what do we know?," ULB Institutional Repository 2013/14198, ULB -- Universite Libre de Bruxelles.
  4. Armendariz de Aghion, Beatriz, 1999. "On the design of a credit agreement with peer monitoring," Journal of Development Economics, Elsevier, vol. 60(1), pages 79-104, October.
  5. Annabel Vanroose, 2008. "What macro factors make microfinance institutions reach out?," Working Papers CEB 08-036.RS, ULB -- Universite Libre de Bruxelles.
  6. Hartarska, Valentina M., 2005. "Governance and Performance of Microfinance Institutions in Central and Eastern Europe and the Newly Independent States," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24568, European Association of Agricultural Economists.
  7. Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2006. "Financial performance and outreach : a global analysis of leading microbanks," Policy Research Working Paper Series 3827, The World Bank.
  8. Marek Hudon & Bernard Lietaer, 2006. "Natural savings: a new microsavings product for inflationary environments," ULB Institutional Repository 2013/14212, ULB -- Universite Libre de Bruxelles.
  9. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
  10. Hartarska, Valentina, 2005. "Governance and performance of microfinance institutions in Central and Eastern Europe and the Newly Independent States," World Development, Elsevier, vol. 33(10), pages 1627-1643, October.
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Cited by:
  1. Ashfaq Ahmad Khan & Wiqar Ahmad, 2013. "Matching resources with demand: a flawed strategy?," Asia Pacific Trade and Investment Review, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 20(1), pages 63-89, June.
  2. Dlamini, Menzie S., 2012. "The effect of subsidies on the performance and sustainability of microfinance institutions in sub-Saharan Africa," Research Theses 134487, Collaborative Masters Program in Agricultural and Applied Economics.

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