IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v39y2007i10p1207-1222.html

Do regulated microfinance institutions achieve better sustainability and outreach? Cross-country evidence

Author

Listed:
  • Valentina Hartarska
  • Denis Nadolnyak

Abstract

In spite of increasing pressure on microfinance institutions (MFIs) operating in developing countries to transform into regulated financial intermediaries, to date, no study has investigated whether regulated MFIs actually achieve better financial results and reach more poor clients than nonregulated MFIs. This article explores the impact of regulation on MFI performance using newly released data for 114 MFIs from 62 countries in an empirical model where performance is specified as a function of MFI-specific, regulatory, macroeconomic and institutional variables. Consistent with recent cross-country evidence on the impact of banking regulations on bank performance (Barth et al., 2004), this article finds that regulatory involvement does not directly affect performance either in terms of operational self-sustainability or outreach. The article also finds that less leveraged MFIs have better sustainability. The policy implication is that MFIs' transformation into regulated financial institutions is may not lead to improved financial results and outreach. However, the finding that MFIs collecting savings reach more borrowers suggests that there may be indirect benefits from regulation, if regulation is the only way for MFIs to access savings.

Suggested Citation

  • Valentina Hartarska & Denis Nadolnyak, 2007. "Do regulated microfinance institutions achieve better sustainability and outreach? Cross-country evidence," Applied Economics, Taylor & Francis Journals, vol. 39(10), pages 1207-1222.
    • Handle: RePEc:taf:applec:v:39:y:2007:i:10:p:1207-1222
    DOI: 10.1080/00036840500461840
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840500461840
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036840500461840?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
    2. Mathias Dewatripont & Jean Tirole, 1994. "The prudential regulation of banks," ULB Institutional Repository 2013/9539, ULB -- Universite Libre de Bruxelles.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yu-Hsiu Lin & Len-Kuo Hu, 2015. "The cyclicality of bank regulation in a general economic framework," Applied Economics, Taylor & Francis Journals, vol. 47(53), pages 5791-5804, November.
    2. repec:onb:oenbwp:y::i:48:b:1 is not listed on IDEAS
    3. Harald Benink & Jón Daníelsson & Ásgeir Jónsson, 2008. "On the Role of Regulatory Banking Capital," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 17(1), pages 85-96, February.
    4. Oindrila Dey & Swapnendu Banerjee, 2014. "Status Incentives with Discrete Effort: A Note," Economics Bulletin, AccessEcon, vol. 34(2), pages 1205-1213.
    5. Ernest Dautovic, 2019. "Has Regulatory Capital Made Banks Safer? Skin in the Game vs Moral Hazard," Cahiers de Recherches Economiques du Département d'économie 19.03, Université de Lausanne, Faculté des HEC, Département d’économie.
    6. Daniel Ripperger-Suhler, 2024. "Matching with Nonexclusive Contracts," Games, MDPI, vol. 15(2), pages 1-39, March.
    7. Josse Delfgaauw & Robert Dur, 2008. "Incentives and Workers' Motivation in the Public Sector," Economic Journal, Royal Economic Society, vol. 118(525), pages 171-191, January.
    8. Manna, Ester, 2013. "Mixed Duopoly with Motivated Teachers," MPRA Paper 52041, University Library of Munich, Germany.
    9. Dietrichson, Jens, 2013. "Coordination Incentives, Performance Measurement and Resource Allocation in Public Sector Organizations," Working Papers 2013:26, Lund University, Department of Economics.
    10. Michael Gavin & Ricardo Hausmann, 1996. "Las raíces de las crisis bancarias: contexto macroeconómico," Research Department Publications 4027, Inter-American Development Bank, Research Department.
    11. Stijn Claessens & M. Ayhan Kose, 2013. "Financial Crises: Explanations, Types and Implications," CAMA Working Papers 2013-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    12. Fidrmuc, Jarko & Lind, Ronja, 2020. "Macroeconomic impact of Basel III: Evidence from a meta-analysis," Journal of Banking & Finance, Elsevier, vol. 112(C).
    13. Ioannidou, V. & de Dreu, J., 2006. "The Impact of Explicit Deposit Insurance on Market Discipline," Other publications TiSEM 693cfa2c-76f1-4304-872f-f, Tilburg University, School of Economics and Management.
    14. Tobias Böhm & Nadine Riedel, 2013. "On Selection into Public Civil Service," CESifo Economic Studies, CESifo Group, vol. 59(1), pages 34-71, March.
    15. Claeys, Sophie, 2005. "Optimal regulatory design for the Central Bank of Russia," BOFIT Discussion Papers 7/2005, Bank of Finland, Institute for Economies in Transition.
    16. Kollmann, Robert & Enders, Zeno & Müller, Gernot J., 2011. "Global banking and international business cycles," European Economic Review, Elsevier, vol. 55(3), pages 407-426, April.
    17. Paul Fisher & Paul Grout, 2017. "Competition and prudential regulation," Bank of England working papers 675, Bank of England.
    18. Elliott Ash & W. Bentley MacLeod, 2015. "Intrinsic Motivation in Public Service: Theory and Evidence from State Supreme Courts," Journal of Law and Economics, University of Chicago Press, vol. 58(4).
    19. Canice Prendergast, 2016. "Bureaucratic Responses," Journal of Labor Economics, University of Chicago Press, vol. 34(S2), pages 183-215.
    20. Katherine Casey & Rachel Glennerster & Edward Miguel & Maarten Voors, 2023. "Skill Versus Voice in Local Development," The Review of Economics and Statistics, MIT Press, vol. 105(2), pages 311-326, March.
    21. Inés Macho-Stadler & David Pérez-Castrillo, 2018. "Moral hazard: Base models and two extensions," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume I, chapter 16, pages 453-485, Edward Elgar Publishing.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:39:y:2007:i:10:p:1207-1222. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.