Impact of COVID-19 pandemic on diversification: Evidence from microfinance

Ki C Han, Sukhun Lee, David Y Suk and Hyun Mo Sung

Finance Research Letters, 2025, vol. 76, issue C

Abstract: In previous global financial crises, microfinance institutions (MFIs) provided a significant diversification benefit to global portfolios. However, since the COVID-19 pandemic significantly impaired the microfinance industry's traditional modes of operation and threatened the survival of microentrepreneurs’ businesses, the diversification benefit was not stable but rather fluctuated during the crisis period. One year before the pandemic, MFIs provided significant diversification benefit; however, during the first year of the pandemic, this benefit disappeared completely and continued to be nonexistent during the second year of the pandemic. During the last year of the pandemic, the diversification benefit became statistically significant again.

Keywords: Microfinance; Diversification; Mean-variance spanning tests; Covid-19; Emerging markets (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325001692

DOI: 10.1016/j.frl.2025.106905

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