Is the model “loans‐plus‐savings” better for microfinance in Eastern Europe and Central Asia? A propensity score matching comparison

Knar Khachatryan, Vardan Baghdasaryan and Valentina Hartarska ()

Review of Development Economics, 2019, vol. 23, issue 3, 1309-1330

Abstract: Microfinance institutions are gradually evolving into multiservice organizations offering not only loans but also savings, and other financial and nonfinancial services. We contribute to the literature aimed at identifying how combining credit with savings affects outreach and sustainability in microfinance institutions (MFIs). We apply the propensity score matching method as well as its augmented dose–response version to compare the performance of loans‐plus‐savings MFIs with that of lending‐only in a sample of 710 observations from Eastern Europe and Central Asia. Owing to our unique capital structure data, we control for the use of subsidized capital, which related work ignores while existing evidence points to tradeoffs between subsidies and savings. We find that financial performance and breadth of outreach are positively associated with savings mobilization, while the evidence on depth of outreach points to a possible mission drift.

Date: 2019
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