Determinants of Margin in Microfinance Institutions
Microfinance institutions (MFIs) lend to the poor, fostering these individuals’ financial inclusion. However, microfinance clients suffer from high interest rates, a type of poverty penalty. Reducing margins and lowering interest rates should be a target for MFIs with a strong social commitment. This paper analyzes the determinants of margin in MFIs. A banking model has been adapted to the case of MFIs. This model has been empirically tested using 9-year panel data. Some factors explaining bank margin also explain MFI margin, with operating expenses being the most important factor. Specific microfinance factors are donations and legal status, as regulated MFIs can collect deposits. It has also been found that MFIs operating in countries with a high level of financial inclusion have low margins.
|Date of creation:||30 Oct 2012|
|Publication status:||Published by:|
|Contact details of provider:|| Postal: CP114/03, 42 avenue F.D. Roosevelt, 1050 Bruxelles|
Phone: +32 (0)2 650.48.64
Fax: +32 (0)2 650.41.88
Web page: http://difusion.ulb.ac.be
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- McShane, R. W. & Sharpe, I. G., 1985. "A time series/cross section analysis of the determinants of Australian trading bank loan/deposit interest margins: 1962-1981," Journal of Banking & Finance, Elsevier, vol. 9(1), pages 115-136, March.
- Mersland, Roy & Øystein Strøm, R., 2009. "Performance and governance in microfinance institutions," Journal of Banking & Finance, Elsevier, vol. 33(4), pages 662-669, April.
- Bhargava, Alok & Sargan, J D, 1983.
"Estimating Dynamic Random Effects Models from Panel Data Covering Short Time Periods,"
Econometric Society, vol. 51(6), pages 1635-1659, November.
- Alok Bhargava & J. D. Sargan, 2006. "Estimating Dynamic Random Effects Models From Panel Data Covering Short Time Periods," World Scientific Book Chapters, in: Econometrics, Statistics And Computational Approaches In Food And Health Sciences, chapter 1, pages 3-27 World Scientific Publishing Co. Pte. Ltd..
- Allen, Linda, 1988. "The Determinants of Bank Interest Margins: A Note," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(02), pages 231-235, June.
- Beck, T.H.L. & Behr, P. & Madestam, A., 2011. "Sex and Credit : Is There a Gender Bias in Microfinance?," Discussion Paper 2011-101, Tilburg University, Center for Economic Research.
- Lepetit, Laetitia & Nys, Emmanuelle & Rous, Philippe & Tarazi, Amine, 2008.
"The expansion of services in European banking: Implications for loan pricing and interest margins,"
Journal of Banking & Finance,
Elsevier, vol. 32(11), pages 2325-2335, November.
- Laetitia Lepetit & Emmanuelle Nys & Philippe Rous & Amine Tarazi, 2008. "The expansion of services in European banking: implications for loan pricing and interest margins," Post-Print hal-01098958, HAL.
- Laetitia Lepetit & Emmanuelle Nys & Philippe Rous & Amine Tarazi, 2008. "The expansion of services in European banking: Implications for loan pricing and interest margins," Post-Print hal-00844822, HAL.
- Maudos, Joaquin & Fernandez de Guevara, Juan, 2004.
"Factors explaining the interest margin in the banking sectors of the European Union,"
Journal of Banking & Finance,
Elsevier, vol. 28(9), pages 2259-2281, September.
- Maudos, Joaquin & Fernandez de Guevara, Juan, 2003. "Factors Explaining the Interest Margin in the Banking Sectors of the European Union," MPRA Paper 15252, University Library of Munich, Germany.
- Mersland, Roy, 2009.
"The Cost of Ownership in Microfinance Organizations,"
Elsevier, vol. 37(2), pages 469-478, February.
- Mersland, Roy, 2007. "The cost of ownership in microfinance organization," MPRA Paper 2061, University Library of Munich, Germany.
- Navajas, Sergio & Schreiner, Mark & Meyer, Richard L. & Gonzalez-Vega, Claudio & Rodriguez-Meza, Jorge, 1998.
"Microcredit And The Poorest Of The Poor: Theory And Evidence From Bolivia,"
Economics and Sociology Occasional Papers
28334, Ohio State University, Department of Agricultural, Environmental and Development Economics.
- Navajas, Sergio & Schreiner, Mark & Meyer, Richard L. & Gonzalez-vega, Claudio & Rodriguez-meza, Jorge, 2000. "Microcredit and the Poorest of the Poor: Theory and Evidence from Bolivia," World Development, Elsevier, vol. 28(2), pages 333-346, February.
- Maudos, Joaquín & Solís, Liliana, 2009.
"The determinants of net interest income in the Mexican banking system: An integrated model,"
Journal of Banking & Finance,
Elsevier, vol. 33(10), pages 1920-1931, October.
- Joaquín Maudos Villarroya & Liliana Solís, 2009. "The determinants of net interest income in the Mexican banking system: an integrated model," Working Papers. Serie EC 2009-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Maudos, Joaquin & Solisa, Liliana, 2009. "The determinants of net interest income in the Mexican banking system: an integrated model," MPRA Paper 15257, University Library of Munich, Germany, revised 2009.
- Demirguc, Asli & Huizinga, Harry, 1999.
"Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence,"
World Bank Economic Review,
World Bank Group, vol. 13(2), pages 379-408, May.
- Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "Determinants of commercial bank interest margins and profitability : some international evidence," Policy Research Working Paper Series 1900, The World Bank.
- Morduch, Jonathan, 1999. "The role of subsidies in microfinance: evidence from the Grameen Bank," Journal of Development Economics, Elsevier, vol. 60(1), pages 229-248, October.
- Bellucci, Andrea & Borisov, Alexander & Zazzaro, Alberto, 2010.
"Does gender matter in bank-firm relationships? Evidence from small business lending,"
Journal of Banking & Finance,
Elsevier, vol. 34(12), pages 2968-2984, December.
- Andrea Bellucci & Alexander V. Borisov & Alberto Zazzaro, 2009. "Does Gender Matter in Bank-Firm Relationships? Evidence from Small Business Lending," Mo.Fi.R. Working Papers 31, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- Roy Mersland & Reidar Øystein Strøm, 2008. "Performance and trade-offs in Microfinance Organisations-does ownership matter?," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(5), pages 598-612.
- Thorsten Beck & Patrick Behr & Andreas Madestam, 2011.
"Sex and Credit: Is There a Gender Bias in Lending?,"
411, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Beck, T.H.L. & Behr, P. & Madestam, A., 2012. "Sex and Credit : Is there a Gender Bias in Lending?," Discussion Paper 2012-062, Tilburg University, Center for Economic Research.
- Hege Gulli, 1998. "Microfinance and Poverty: Questioning the Conventional Wisdom," IDB Publications (Books), Inter-American Development Bank, number 79506 edited by Nancy Morrison, May.
- Saunders, Anthony & Schumacher, Liliana, 2000. "The determinants of bank interest rate margins: an international study," Journal of International Money and Finance, Elsevier, vol. 19(6), pages 813-832, December.
- Behr, Patrick & Entzian, Annekathrin & Güttler, Andre, 2011. "How do lending relationships affect access to credit and loan conditions in microlending?," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2169-2178, August.
- Alberto F. Alesina & Francesca Lotti & Paolo Emilio Mistrulli, 2013.
"Do Women Pay More For Credit? Evidence From Italy,"
Journal of the European Economic Association,
European Economic Association, vol. 11, pages 45-66, 01.
- Hermes, Niels & Lensink, Robert, 2011. "Microfinance: Its Impact, Outreach, and Sustainability," World Development, Elsevier, vol. 39(6), pages 875-881, June.
- Angbazo, Lazarus, 1997. "Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking," Journal of Banking & Finance, Elsevier, vol. 21(1), pages 55-87, January.
- Nicolas Krauss & Ingo Walter, 2009. "Can Microfinance Reduce Portfolio Volatility?," Economic Development and Cultural Change, University of Chicago Press, vol. 58(1), pages 85-110, October.
- Servin, Roselia & Lensink, Robert & van den Berg, Marrit, 2012. "Ownership and technical efficiency of microfinance institutions: Empirical evidence from Latin America," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 2136-2144.
- Ahlin, Christian & Lin, Jocelyn & Maio, Michael, 2011. "Where does microfinance flourish? Microfinance institution performance in macroeconomic context," Journal of Development Economics, Elsevier, vol. 95(2), pages 105-120, July.
When requesting a correction, please mention this item's handle: RePEc:sol:wpaper:2013/130924. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)
If references are entirely missing, you can add them using this form.