Determinants of Margin in Microfinance Institutions

Beatriz Cuéllar Fernández, Yolanda Fuertes (), Carlos Serrano-Cinca and Begoña Gutiérrez-Nieto

No 12-030, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: 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.

Keywords: Microfinance institutions; banking; net interest income; outreach; financial inclusion (search for similar items in EconPapers)
JEL-codes: C23 G21 R51 (search for similar items in EconPapers)
Pages: 23 p.
Date: 2012-10-30
New Economics Papers: this item is included in nep-ban and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Determinants of margin in microfinance institutions (2016)
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