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Financial Performance of Microfinance Institutions-A Macroeconomic and Institutional Perspective

Author

Listed:
  • Katsushi S. Imai

    (Economics, School of Social Sciences, University of Manchester (UK) and RIEB, Kobe University (Japan))

  • Raghav Gaiha

    (Faculty of Management Studies, University of Delhi, India)

  • Ganesh Thapa

    (International Fund for Agricultural Development, Italy)

  • Samuel Kobina Annim

    (ELancashire Business School, University of Central Lancashire (UK) and Department of Economics, University of Cape Coast (Ghana))

  • Aditi Gupta

    (Yes Bank, Mumbai)

Abstract

This study investigates the effect of both institutional factors and the macro economy on the financial performance of MFIs. Drawing upon the Microfinance Information Exchange data and cross-country data on macro economy, finance and institutions, we use three stage least squares and Hausman-Taylor to take account of endogeneity. We find that institutional factors affect MFIs’ financial performance, in particular, profitability, operating expense, and portfolio quality. Also, GDP and share of domestic credit to GDP have positive impacts on MFIs’ financial performance. Hence policies to raise country-level institutional qualities are required for making the activities of MFIs sustainable.

Suggested Citation

  • Katsushi S. Imai & Raghav Gaiha & Ganesh Thapa & Samuel Kobina Annim & Aditi Gupta, 2012. "Financial Performance of Microfinance Institutions-A Macroeconomic and Institutional Perspective," Discussion Paper Series DP2012-04, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2012-04
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2012-04.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Sefa Awaworyi Churchill & Jeffrey Korankye Danso & Elikem Nyatefe, 2018. "Microfinance Institution Performance: Does the Macroeconomy Matter?," Economic Papers, The Economic Society of Australia, vol. 37(4), pages 429-442, December.
    2. Sefa Awaworyi Churchill, 2017. "Microfinance and Ethnic Diversity," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 112-141, March.

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    More about this item

    Keywords

    Microfinance; Financial Performance; Macro economy and Institutions;
    All these keywords.

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