Financial Sustainability of microfinance institutions that provide elderly social welfare

Roongkiat Ratanabanchuen ()
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Roongkiat Ratanabanchuen: Chulalongkorn Business School, Postal: 254 Phayathai Rd, Wang Mai, Khet Pathum Wan, Bangkok, Thailand. 10330.

Asian Journal of Applied Economics/ Applied Economics Journal, 2017, vol. 24, issue 1, 1-22

Abstract: Microfinance in Thailand has been developed from being an institution that provides savings and loans into an institution that incorporates social welfare benefits for its members. These benefits are long-term liabilities of the funds and, therefore, can create solvency risk. This paper develops a mathematical model that evaluates the financial sustainability of the fund. The minimum rate of returns that the funds will have to generate in order to maintain its solvency is calculated. After comparing this measure with the actual rate of returns, we found that 13 out of the 40 villages in Trat are insolvent. The main reason of this insolvency is the low saving rates among fund members. It is not because of the high level of social welfare benefits. Therefore, if fund members realize the importance of a discipline in savings, it will encourage the long-term financial sustainability of microfinance in their area.

Keywords: Financial Sustainability; Microfinance; Demographic (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2017
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