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Microbanks: Ownership, performance and social tradeoffs - a global analysis

  • Mersland, Roy
  • Strøm, R. Øystein

Suppliers of microfinance are typically Non Governmental Organizations (NGOs), cooperatives or specialized microfinance institutions incorporated as Shareholder Firms (SHFs). Leaving out the cooperatives we study whether NGOs and SHFs differ in bringing along social benefit to their clients. Specifically, is there a trade-off between different dimensions of social benefits, and can these tradeoffs predict ownership type? To frame the comparison of NGOs and SHFs we make use of Schreiner’s (2002) framework for discussion of the social benefits of microfinance. A self constructed dataset with unusually high-quality rating information from 132 NGOs and 68 SHFs in 53 countries is used to carry out the statistical tests. Our findings indicate that SHFs and NGOs are more similar than different. Our hypothesis that NGOs are more socially oriented than SHFs is rejected. SHFs’ benefit in scale and scope seems not related to ownership, but to legal constraints impeding NGOs to mobilize savings. Our second conclusion is that we cannot find a trade-off among outreach variables. Specifically, the return on assets is higher in NGOs. We conclude that ownership doesn’t influence the performance of microfinance organizations. Our conclusion is in line with findings in the general banking industry.

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File URL: http://mpra.ub.uni-muenchen.de/3966/1/MPRA_paper_3966.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2063.

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Date of creation: 30 Jan 2007
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Handle: RePEc:pra:mprapa:2063
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  1. Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2006. "Financial performance and outreach : a global analysis of leading microbanks," Policy Research Working Paper Series 3827, The World Bank.
  2. Altunbas, Yener & Evans, Lynne & Molyneux, Philip, 2001. "Bank Ownership and Efficiency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 926-54, November.
  3. Stijn Claessens & Erik Feijen, 2006. "Financial Sector Development and the Millennium Development Goals," World Bank Publications, The World Bank, number 7145.
  4. David Mayers & Clifford W. Smith, 2005. "Agency Problems and the Corporate Charter," Journal of Law, Economics and Organization, Oxford University Press, vol. 21(2), pages 417-440, October.
  5. Crespi, Rafel & Garcia-Cestona, Miguel A. & Salas, Vicente, 2004. "Governance mechanisms in Spanish banks. Does ownership matter?," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2311-2330, October.
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