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Can combining credit with insurance or savings enhance the sustainability of microfinance institutions?

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  • Koen Rossel-Cambier

Abstract

Worldwide, microcredit organizations are gradually transforming to multi-servicing organizations offering additional financial services. This paper examines whether combining microcredit with insurance and/or savings enhances their economic performance by increasing their efficiency, productivity, sustainability or portfolio quality indicators. Using cross-sectional data from 250 microfinance institutions (MFIs) from Latin America and the Caribbean, it compares MFIs offering credit only with those combining credit with respectively savings and insurance. By using multiple regression analysis, this research finds positive effects of both savings and insurance on the efficiency and productivity of MFIs. Still, this research didn't find significant results with relation to the sustainability and portfolio quality of MFIs. Overall, taking into account various risks, combined microfinance can enhance organisational efficiency and productivity because of the different economies of scope which can be achieved. This reveals especially for large and mature MFIs which already exhibit readiness in terms of human, financial, and organizational resources to deal with the complexity of delivering multiple financial services.

Suggested Citation

  • Koen Rossel-Cambier, 2010. "Can combining credit with insurance or savings enhance the sustainability of microfinance institutions?," Working Papers CEB 10-057, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:sol:wpaper:2013/70367
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    Keywords

    performance; microfinance; combined microfinance; microinsurance; microcredit; microsavings; Latin America and the Caribbean;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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