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Economic Governance of MFIs: Inside the Black Box

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  • Arun, Thankom
  • Annim, Samuel Kobina

Abstract

This paper investigates a relationship between economic governance and the dual objectives of Microfinance Institutions (MFIs): poverty reduction and financial viability. Using an unbalanced panel of 531 MFIs the important role of other institutions such as country-level business registry departments in facilitating targeting of poor clients is illuminated. Comparing the estimates of Hausman-Taylor and Fixed Effects Vector Decomposition allows us to scrutinize and at least partially correct the effects of both time invariant and slow changing endogenous variables. We find that credit information availability and lesser time in securing property enhances the chances of MFIs in achieving their poverty reduction objective. Product diversification leading to economies of scope also enables MFIs to reach poor clients. On the basis of the above, it is imperative for government and development partners to channel their efforts towards provision of an enabling atmosphere that will enhance the achievement of microfinance social objectives.

Suggested Citation

  • Arun, Thankom & Annim, Samuel Kobina, 2010. "Economic Governance of MFIs: Inside the Black Box," MPRA Paper 24649, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24649
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    Cited by:

    1. Awaworyi Churchill, Sefa & Korankye Danso, Jeffrey & Nyatefe, Elikem, 2015. "Microfinance Institution Performance: Does the Macro-economy matter?," EconStor Preprints 123724, ZBW - German National Library of Economics.
    2. Aruna Chandra & Thankom Arun, 2011. "United States Microfinance: Regulating to Promote Growth?," NFI Working Papers 2011-WP-28, Indiana State University, Scott College of Business, Networks Financial Institute.

    More about this item

    Keywords

    Microfinance; Dual Objectives; Economic Governance; Property Rights; and Credit Information;

    JEL classification:

    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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