The challenge of rural financial inclusion – evidence from microfinance

Tania Lopez and Adalbert Winkler

Applied Economics, 2018, vol. 50, issue 14, 1555-1577

Abstract: Financial inclusion is said to foster development and growth. However, progress in financial inclusion has been slow in rural areas where poverty is most pronounced. This is often attributed to higher transaction costs, higher risks and a more unfavourable contracting environment which makes it more difficult for financial institutions to achieve and maintain sustainability in rural compared to urban areas. Based on data covering 772 microfinance institutions (MFIs) over the period 2008–2013, we test whether rural financial inclusion, notably lending to rural borrowers, is hampered by stronger sustainability challenges than inclusion in urban markets. Our results suggest that a higher share of rural borrowers has no direct effect on MFI sustainability. However, we find that MFIs with a higher share of rural borrowers are less able to exploit economies of scale and productivity effects. Thus, our results provide support for the view that sustainability challenges make it more difficult to achieve progress in financial inclusion in rural than in urban areas.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2017.1368990 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:50:y:2018:i:14:p:1555-1577

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2017.1368990

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().