The determinants of MFIs’ social and financial performances in sub-Saharan Africa: has mission drift occurred?

Wassini Arrassen ()
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Wassini Arrassen: Université Hassan II

Annals of Finance, 2017, vol. 13, issue 2, No 4, 205-235

Abstract: Abstract This paper studies the determinants of microfinance institutions’ (MFIs) financial performance (FP: self-sustainability and profitability) and social performance (SP: depth of outreach), and examine the FP/SP tradeoffs they face. Based on a sample of 120 MFIs over the period 2000–2009, we use the random effects method to isolate the effect of fixed-time factors such as loan lending technique, legal status and location (sub-region) on MFIs’ behavior. We find that financial expenses, wages and portfolio quality, mainly influence MFIs’ financial performance whereas social performance is mostly influenced by lending methodology and institutional form, and to a lesser extent by location. The analysis of FP–SP shows that mission drift is a concern primarily for banks, mutual/cooperatives and individual lenders. The results question the trend toward microfinance commercialization since it weakens outreach without improving significantly self-sustainability and profitability.

Keywords: Microfinance; Performance; Mission drift; Sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: G21 O11 O16 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10436-017-0296-x

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