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Determinants of margin in microfinance institutions

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  • Beatriz Cuéllar-Fernández
  • Yolanda Fuertes-Callén
  • Carlos Serrano-Cinca
  • Begoña Gutiérrez-Nieto

Abstract

Microfinance institutions (MFIs) lend to the poor. However, microfinance clients suffer from high interest rates, a type of poverty penalty. This article analyses the margin determinants in MFIs. A banking model has been adapted to microfinance. This model has been tested using 9-year panel data. Some factors explaining bank margin also explain MFI margin, with operating costs being the most important factor. Specific microfinance factors are donations and legal status, as regulated MFIs can collect deposits. It has also been found that MFIs operating in countries with a high level of financial inclusion have low margins.

Suggested Citation

  • Beatriz Cuéllar-Fernández & Yolanda Fuertes-Callén & Carlos Serrano-Cinca & Begoña Gutiérrez-Nieto, 2016. "Determinants of margin in microfinance institutions," Applied Economics, Taylor & Francis Journals, vol. 48(4), pages 300-311, January.
  • Handle: RePEc:taf:applec:v:48:y:2016:i:4:p:300-311
    DOI: 10.1080/00036846.2015.1078447
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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