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Sustainability, Growth and Impact of Microfinance Institutions in Africa

In: The Economics of Banking and Finance in Africa

Author

Listed:
  • Elikplimi Komla Agbloyor

    (University of Ghana Business School
    Stellenbosch Business School)

  • Simplice A. Asongu

    (University of South Africa)

  • Peter W. Muriu

    (University of Nairobi)

  • Alfred Yawson

    (University of Adelaide Business School)

Abstract

Microfinance is one of the key development finance tools intended to reduce poverty in developing regions such as Africa. In this chapter, we review the sustainability, growth and impact of MFIs in Africa. Though MFIs in Africa were financially self-sustainable, they had the lowest FSS ratio globally. Surprisingly, we found that MFIs in Africa were not subsidy dependent. They had the lowest SDI ratio globally. The yields on loan books of MFIs in Africa have to increase by about 1.5% for MFIs in the region to exit subsidy dependence. The average number of active borrowers in Africa was low compared to the rest of the world. Africa performed averagely when it comes to lending to women and the rural poor. We also found evidence of mission draft amongst African MFIs, given that they tend to give relatively large loans. In terms of the quality of the loan book, Africa had the poorest with a portfolio at risk ratio of 14%. The review showed that there has been a significant growth in microfinance in the continent. The study further identified a number of factors that have influenced the widespread growth of microfinance in Africa. Finally, the chapter shows that the evidence on the impact of microfinance on improving welfare in the continent is inconclusive at best.

Suggested Citation

  • Elikplimi Komla Agbloyor & Simplice A. Asongu & Peter W. Muriu & Alfred Yawson, 2022. "Sustainability, Growth and Impact of Microfinance Institutions in Africa," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Joshua Yindenaba Abor & Charles Komla Delali Adjasi (ed.), The Economics of Banking and Finance in Africa, chapter 0, pages 797-827, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-031-04162-4_23
    DOI: 10.1007/978-3-031-04162-4_23
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