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Which types of microfinance institutions decentralize the loan approval process?

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  • Tchakoute Tchuigoua, Hubert

Abstract

Which characteristics of microfinance institutions affect the choice of a decentralized loan approval process? That is the main question this article attempts to answer. A second concern is whether the choice of allocating the loan approval decision to the loan officer enables a microfinance institution to expand its number of loans and improve its loan portfolio quality after controlling for the endogeneity of the choice of decentralizing the loan approval. To achieve this goal, we study an independently pooled cross-section sample of 362 assessment reports for 267 MFIs from 2001 to 2012 across 67 countries. Results suggest that size, cooperative status, and solidarity lending are MFI-level variables that affect the likelihood of choosing a decentralized loan approval process. Allocating the decision-making authority to the loan officer improves MFIs’ breadth of outreach (the number of active borrowers) but does not affect the size of the loan portfolio and does not deteriorate their loan portfolio quality.

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  • Tchakoute Tchuigoua, Hubert, 2018. "Which types of microfinance institutions decentralize the loan approval process?," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 237-244.
    • Handle: RePEc:eee:quaeco:v:67:y:2018:i:c:p:237-244
    DOI: 10.1016/j.qref.2017.07.002
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    Cited by:

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    2. Pignatel, Isabelle & Tchakoute Tchuigoua, Hubert, 2020. "Microfinance institutions and International Financial Reporting Standards: An exploratory analysis," Research in International Business and Finance, Elsevier, vol. 54(C).
    3. Ivailo Marinov, 2019. "Trans-Border Expansion In The Quick Loans Sector (Problems And Solutions)," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 2 Year 20, pages 43-62.
    4. Magloire Nya Tchatchoua & Isabelle Pignatel & Hubert Tchakoute Tchuigoua, 2019. "What type of microfinance institutions comply with International Financial Reporting Standards?," Working Papers CEB 19-012, ULB -- Universite Libre de Bruxelles.

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    More about this item

    Keywords

    Decentralization; Loan officer; Loan approval; Legal status; Microfinance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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