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Economies of Diversification in Microfinance: Evidence from Quantile Estimation on Panel Data


  • Malikov, Emir
  • Hartarska, Valentina
  • Mersland, Roy


Prior studies of the diversification-driven cost savings from the joint provision of credit and deposits in microfinance usually ignore the multi-way heterogeneity across MFIs which vary substantially in size, business model, target clientele and operate in diverse environments. Using a quantile panel data model with correlated effects capable of accommodating multiple heterogeneity, we show that the typical measurement of economies of diversification at the mean provides an incomplete and distorted picture of their magnitude and prevalence in the industry. While we find statistically significant estimates, they are modest for most small-size MFIs but are quite substantial for large-scale institutions.

Suggested Citation

  • Malikov, Emir & Hartarska, Valentina & Mersland, Roy, 2019. "Economies of Diversification in Microfinance: Evidence from Quantile Estimation on Panel Data," MPRA Paper 95935, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:95935

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    cost; diversification; microfinance institutions; quantile regression;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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