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Unsubsidized microfinance institutions

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  • D’Espallier, Bert
  • Hudon, Marek
  • Szafarz, Ariane

Abstract

This paper starts from the observation that 23% of the world’s microfinance institutions (MFIs) manage without subsidies. We examine how unsubsidized institutions cope with their social mission. Overall, the lack of subsidies worsens social performances. However, our results show that strategies to achieve financial self-sufficiency differ substantially across regions. African and Asian MFIs compensate for non-subsidization by charging higher interest rates. In Eastern Europe and Central Asia, unsubsidized MFIs find it more suitable to target less poor clients. Unsubsidized Latin American MFIs tend to reduce their share of female borrowers.

Suggested Citation

  • D’Espallier, Bert & Hudon, Marek & Szafarz, Ariane, 2013. "Unsubsidized microfinance institutions," Economics Letters, Elsevier, vol. 120(2), pages 174-176.
    • Handle: RePEc:eee:ecolet:v:120:y:2013:i:2:p:174-176
    DOI: 10.1016/j.econlet.2013.04.021
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    1. Steven B. Caudill & Daniel M. Gropper & Valentina Hartarska, 2009. "Which Microfinance Institutions Are Becoming More Cost Effective with Time? Evidence from a Mixture Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(4), pages 651-672, June.
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    More about this item

    Keywords

    Microfinance; Subsidies; Female borrowers; Poverty reduction; Average loan size; Interest rates;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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