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The impact of COVID-19 on the efficiency of microfinance institutions

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  • Zheng, Chen
  • Zhang, Junru

Abstract

This study investigates the effect of the COVID-19-induced decline in economic activities on the financial and social efficiency of microfinance institutions (MFIs). We find that the pandemic-induced impact decreases the financial efficiency of MFIs; however, the social efficiency of MFIs is increased under the impact of COVID-19. To explore potential channels through which efficiency is influenced by the COVID-19 outbreak, we examine the supply and demand side of MFIs’ funding. We find that the lending rate mediates the relationship between the impact of COVID-19 and MFI efficiency, whereas the mediating role of the funding rate is negligible.

Suggested Citation

  • Zheng, Chen & Zhang, Junru, 2021. "The impact of COVID-19 on the efficiency of microfinance institutions," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 407-423.
    • Handle: RePEc:eee:reveco:v:71:y:2021:i:c:p:407-423
    DOI: 10.1016/j.iref.2020.09.016
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    Keywords

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    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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