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The Vulnerability of Microfinance to Financial Turmoil – Evidence from the Global Financial Crisis

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  • Wagner, Charlotte
  • Winkler, Adalbert

Abstract

Has microfinance become crisis-prone like other sources of finance? This paper provides empirical evidence on credit growth patterns of microfinance institutions in the early 2000s. Results suggest that microfinance has become vulnerable to financial turmoil. In the global financial crisis credit growth dropped sharply. Moreover, the crisis impact was more severe when institutions had been active in tapping domestic and international financial markets for funds and had operated in countries experiencing a severe post-crisis recession. Finally we find that microcredit adopted the cyclical characteristics of credit growth in the traditional banking sector, with credit booms followed by credit busts.

Suggested Citation

  • Wagner, Charlotte & Winkler, Adalbert, 2013. "The Vulnerability of Microfinance to Financial Turmoil – Evidence from the Global Financial Crisis," World Development, Elsevier, vol. 51(C), pages 71-90.
  • Handle: RePEc:eee:wdevel:v:51:y:2013:i:c:p:71-90 DOI: 10.1016/j.worlddev.2013.05.008
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    Cited by:

    1. Erhardt, Eva Christine, 2017. "Microfinance beyond self-employment: Evidence for firms in Bulgaria," Labour Economics, Elsevier, vol. 47(C), pages 75-95.
    2. Patrick Reichert, 2016. "A meta-analysis examining the nature of trade-offs in microfinance," Working Papers CEB 16-005, ULB -- Universite Libre de Bruxelles.
    3. Cull, Robert & Navajas, Sergio & Nishida, Ippei & Zeiler, Renate, 2015. "A New Index of the Business Environment for Microfinance," World Development, Elsevier, vol. 70(C), pages 357-388.
    4. B. Mak Arvin & Byron Lew (ed.), 2015. "Handbook on the Economics of Foreign Aid," Books, Edward Elgar Publishing, number 15762, April.
    5. Janda, Karel & Van Tran, Quang & Zetek, Pavel, 2014. "Influence of External Funding on Microfinance Performance," MPRA Paper 58170, University Library of Munich, Germany.
    6. Janda, Karel & Van Tran, Quang & Zetek, Pavel, 2014. "Vybrané faktory ovlivňující zapojení žen v mikrofinancích
      [The Selected Factors Influencing the Participation of Women in Microfinance]
      ," MPRA Paper 59109, University Library of Munich, Germany.
    7. Wijesiri, Mahinda, 2016. "Weathering the storm: ownership structure and performance of microfinance institutions in the wake of the global financial crisis," Economic Modelling, Elsevier, vol. 57(C), pages 238-247.
    8. Janda, Karel & Tran, Quang & Zetek, Pavel, 2014. "Vliv externího financování na mikrofinanční rozvoj - makro perspektiva
      [Influence of external funding on microfinance performance - macro perspective]
      ," MPRA Paper 58166, University Library of Munich, Germany.
    9. Janda, Karel & Zetek, Pavel, 2014. "Survey of Microfinance Controversies and Challenges," MPRA Paper 56657, University Library of Munich, Germany.

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