Microfinance Institutions: Does Capital Structure Matter?

Vicki Bogan

No 51125, Working Papers from Cornell University, Department of Applied Economics and Management

Abstract: Microfinance Institutions (MFIs) have risen to the forefront as invaluable institutions in the development process. Nevertheless, capital constraints have hindered the expansion of microfinance programs such that the demand for financial services still far exceeds the currently available supply. Moreover, it is observed that microfinance organizations have had various degrees of sustainability. Thus, the question of how best to fund these programs is a key issue. Recognizing the potential of microfinance in the development process, this paper examines the existing sources of funding for MFIs by geographic region, and explores how changes in capital structure could facilitate future growth and improve the efficiency and financial sustainability of MFIs. Using panel data, I establish a link between capital structure and key measures of MFI success. Notably, I find causal evidence supporting the assertion that an increased use of grants by MFIs decreases operational self-sufficiency.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 45
Date: 2008-04-30
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:cudawp:51125

DOI: 10.22004/ag.econ.51125

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