Geographic diversification and credit risk in microfinance

Stephen Zamore, Leif Atle Beisland and Roy Mersland

Journal of Banking & Finance, 2019, vol. 109, issue C

Abstract: This paper examines the relation between geographic diversification and credit risk in microfinance. The empirical findings from the banking industry are mixed and inconclusive. This study extends the discussion into a new international setting: the global microfinance industry with lenders having both social and financial objectives. Using a large global sample of microfinance institutions (MFIs), we find that geographic diversification comes with more credit risks. However, this finding is more pronounced among non-shareholder MFIs like NGOs and cooperatives, compared to shareholder-owned MFIs. Moreover, the results show that MFIs can mitigate the effect of geographic diversification on risk with group lending methodology.

Keywords: Microfinance; Geographic diversification; Credit risk; Portfolio at risk; Loan-loss provisions; Nonperforming loans (search for similar items in EconPapers)
JEL-codes: G21 G23 G24 L31 O16 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:109:y:2019:i:c:s0378426619302407

DOI: 10.1016/j.jbankfin.2019.105665

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