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Sustainability and depth of outreach: Evidence from microfinance institutions in sub‐Saharan Africa

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  • Sefa Awaworyi Churchill

Abstract

The feasibility of microfinance institutions (MFIs) to expand outreach to the poorest while remaining financially sustainable has long been debated. Using data from 206 MFIs in 33 African countries, we adopt the three‐stage least square technique to assess whether a trade‐off exists between sustainability and outreach depth. Our results confirm the existence of a trade‐off. The evidence also supports ongoing subsidies for MFIs with the aim of encouraging outreach. In addition, we examine whether there is an inflection point beyond which higher interest rates reduce profitability for MFIs. We find no evidence of a threshold beyond which profitability is reduced.

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  • Sefa Awaworyi Churchill, 2018. "Sustainability and depth of outreach: Evidence from microfinance institutions in sub‐Saharan Africa," Development Policy Review, Overseas Development Institute, vol. 36(S2), pages 676-695, September.
    • Handle: RePEc:bla:devpol:v:36:y:2018:i:s2:p:o676-o695
    DOI: 10.1111/dpr.12362
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    Cited by:

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    2. 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.
    3. Djibril Faye & Zaka Ratsimalahelo, 2022. "Dynamic analysis of the interest rate determinant in microfinance institutions," Working Papers 2022-09, CRESE.
    4. Farah NAZ & Sarah SALIM & Ramiz ur REHMAN & Muhammad Ishfaq AHMAD & Rizwan ALI, 2019. "Determinants of financial sustainability of microfinance institutions in Pakistan," Upravlenets, Ural State University of Economics, vol. 10(4), pages 51-64, September.
    5. Stephen Kosgei BITOK & Josephat CHEBOI & Ambrose KEMBOI, 2019. "Does Portfolio Quality Influence Financial Sustainability? A Case of Microfinance Institutions in Kenya," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 3(2), pages 23-39.

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