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The impact of COVID-19 on the efficiency of microfinance institutions

Chen Zheng and Junru Zhang

International Review of Economics & Finance, 2021, vol. 71, issue C, 407-423

Abstract: This study investigates the effect of the COVID-19-induced decline in economic activities on the financial and social efficiency of microfinance institutions (MFIs). We find that the pandemic-induced impact decreases the financial efficiency of MFIs; however, the social efficiency of MFIs is increased under the impact of COVID-19. To explore potential channels through which efficiency is influenced by the COVID-19 outbreak, we examine the supply and demand side of MFIs’ funding. We find that the lending rate mediates the relationship between the impact of COVID-19 and MFI efficiency, whereas the mediating role of the funding rate is negligible.

Keywords: Microfinance institutions; Financial efficiency; Social efficiency; COVID-19 (search for similar items in EconPapers)
JEL-codes: E02 G21 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:71:y:2021:i:c:p:407-423

DOI: 10.1016/j.iref.2020.09.016

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