From NGOs to Banks: Does Institutional Transformation Alter the Business Model of Microfinance Institutions?
D’Espallier, Bert,
Jann Goedecke,
Marek Hudon and
Roy Mersland
World Development, 2017, vol. 89, issue C, 19-33
Abstract:
In the microfinance industry an increasing number of providers are undergoing an institutional transformation from NGO to a shareholder-owned and typically regulated financial entity. Little is known about the extent to which this transformation affects the way microfinance institutions (MFIs) conduct their business. Our results obtained by applying an event study methodology to 66 transformed MFIs suggest that portfolio yield is driven down by 3.9 percentage points due to transformation, indicating that clients get more favorable interest rates. MFIs are able to significantly cut down their operational expenses, of which 1.1 percentage points can be attributed to transformation. Other findings include a steep increase in commercial debt leverage and deposits, a significant decrease in the fluctuation of funding costs and a sharp rise in average loan size, often taken as an indicator for mission drift. Profitability in terms of ROA drops in the short term, while ROE is driven up in the medium to long run, suggesting a more shareholder-oriented attitude.
Keywords: microfinance; transformation; business model; regulation (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0305750X16304077
Full text for ScienceDirect subscribers only
Related works:
Working Paper: From NGOs to banks: Does institutional transformation alter the business model of microfinance institutions? (2016) 
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:wdevel:v:89:y:2017:i:c:p:19-33
DOI: 10.1016/j.worlddev.2016.06.021
Access Statistics for this article
World Development is currently edited by O. T. Coomes
More articles in World Development from Elsevier
Bibliographic data for series maintained by Catherine Liu ().