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Profitability Determinants in Microfinance Industry: Case of Zimbabwe (2010-2014)

Author

Listed:
  • Blessing Katuka,
  • Ranga Mathias Mavhunga

Abstract

:This paper looked at determinants of profitability of microfinance institutions operating in Zimbabwe. The study employed case study approach on one credit-only MFI in Zimbabwe. Using Multiple Regression Techniques, the study identified profitability determinants in the Zimbabwean microfinance industry using 2011-2015 monthly data. Major findings were that ROA and ROE are influenced differently by cost efficiency ratio, cost per borrower ratio and GNU. The study showed that both ROA and ROE are negatively influenced by cost efficiency and cost per borrower ratios. The identified relationship supports the X-efficiency hypothesis which assumes negative relationship between cost/income ratio and profitability. ROA model detected GNU as significant variable and according to results, the variable has negative influence on ROA. To improve profitability in the Zimbabwean microfinance industry, the researcher recommends MFI managers to closely monitor cost efficiency and cost per borrower ratios. The study also roped in government as key stakeholder in driving profitability within the microfinance industry. The study recommends Zimbabwean government to pursue consistency in its political policies as well as systems.

Suggested Citation

  • Blessing Katuka, & Ranga Mathias Mavhunga, 2016. "Profitability Determinants in Microfinance Industry: Case of Zimbabwe (2010-2014)," Journal of Global Economy, Research Centre for Social Sciences,Mumbai, India, vol. 12(4), pages 219-242, December.
    • Handle: RePEc:jge:journl:1241
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    More about this item

    Keywords

    Profitability; Government of National Unity; Multiple regression; X-efficiency; Zimbabwe;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • I2 - Health, Education, and Welfare - - Education

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