Buffer capital, loan portfolio quality and the performance of microfinance institutions: A global analysis

Godfred Adjapong Afrifa, Ernest Gyapong and Alaa Mansour Zalata

Journal of Financial Stability, 2019, vol. 44, issue C

Abstract: Using a sample of 625 microfinance institutions (MFI) across 40 countries from 2010 to 2015, we empirically examine the effect of buffer capital on the performance of MFIs and how this effect varies with loan portfolio quality. We find a negative relationship between buffer capital and MFIs’ performance. We further document that loan portfolio quality positively moderates the buffer capital-MFI performance relationship. We demonstrate that the buffer capital-loan portfolio quality relationship does not vary for deposit-taking, profit-making, and regulated MFIs. Our findings shed new light on the value relevance of capital in microfinance institutions. We use a novel approach to evaluate our results in light of the effects of omitted variable bias.

Keywords: Buffer capital; Microfinance institutions; Performance; Loan portfolio quality (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1572308918304248
Full text for ScienceDirect subscribers only

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:eee:finsta:v:44:y:2019:i:c:s1572308918304248

DOI: 10.1016/j.jfs.2019.100691

Access Statistics for this article

Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman

More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Catherine Liu ().