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Microfinance Institutions: A Profitable Investment Alternative?

Author

Listed:
  • NOEL D. CAMPBELL

    (College of Business, University of Central Arkansas, 201 Donaghey Avenue Conway, AR 72035, USA)

  • TAMMY M. ROGERS

    (College of Business, University of Central Arkansas, Conway, AR 72035, USA)

Abstract

This paper examines the determinants of return on equity for microfinance institutions (MFI), an important source of funds for entrepreneurs in developing countries. Recent research indicates that MFIs need to become financially sustainable without relying on external funding. To meet this objective, MFIs have begun to look to the capital markets as a source of funds. Our findings indicate that investors in MFIs can look at measures similar to those used by traditional financial institutions, like commercial banks, such as operating expense and portfolio yield measures to measure possible performance of a MFI. MFIs that have a larger percentage of women borrowers fare better. Additionally, we find that country specific macroeconomic conditions affect MFI return.

Suggested Citation

  • Noel D. Campbell & Tammy M. Rogers, 2012. "Microfinance Institutions: A Profitable Investment Alternative?," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 17(04), pages 1-10.
    • Handle: RePEc:wsi:jdexxx:v:17:y:2012:i:04:n:s1084946712500240
    DOI: 10.1142/S1084946712500240
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    Citations

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    Cited by:

    1. Md Aslam Mia & Sunil Sangwan & A. H. M. Belayeth Hussain & Nurhafiza Abdul Kader Malim, 2022. "Rural–urban financial inclusion: Implications on the cost sustainability of microfinance lenders," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1899-1911, September.
    2. Moss, Todd W. & Renko, Maija & Block, Emily & Meyskens, Moriah, 2018. "Funding the story of hybrid ventures: Crowdfunder lending preferences and linguistic hybridity," Journal of Business Venturing, Elsevier, vol. 33(5), pages 643-659.
    3. Niels Hermes & Marek Hudon, 2018. "Determinants Of The Performance Of Microfinance Institutions: A Systematic Review," Journal of Economic Surveys, Wiley Blackwell, vol. 32(5), pages 1483-1513, December.
    4. Beatrice Sarpong‐Danquah & Michael Adusei & Joseph Magnus Frimpong, 2023. "Effect of board gender diversity on the financial performance of microfinance institutions: Does judicial efficiency matter?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(2), pages 495-518, June.
    5. Emilio M. Santandreu & Joaquín López Pascual & Salvador Cruz Rambaud, 2020. "Determinants of Repayment among Male and Female Microcredit Clients in the USA. An Approach Based on Managers’ Perceptions," Sustainability, MDPI, vol. 12(5), pages 1-17, February.
    6. Pranith Kumar Roy & Krishnendu Shaw, 2021. "A multicriteria credit scoring model for SMEs using hybrid BWM and TOPSIS," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-27, December.
    7. Hermes, Cornelis & Hudon, M., 2018. "Determinants of the Performance of Microfinance Institutions: A Systematic Review," Research Report 2018008, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    8. Salvador Cruz Rambaud & Joaquín López Pascual & Emilio M. Santandreu, 2023. "A socioeconomic approach to the profile of microcredit holders from the Hispanic minority in the USA," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-25, December.

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