Economic policy uncertainty and credit risk in microfinance: A cross‐country analysis

Mufang Xie

International Journal of Finance & Economics, 2025, vol. 30, issue 2, 1969-1985

Abstract: Using a cross‐country data set of 670 microfinance institutions (MFIs) in nine countries from 1999 to 2018, this study examines the impact of economic policy uncertainty (EPU) on the credit risk of MFIs. The empirical results show that EPU significantly increases the credit risk of MFIs. Our findings are valid in a series of robustness checks. The moderating effects reveal that group lending can mitigate the impact of EPU on the credit risk of MFIs and that EPU has a weaker impact on nongovernmental organizations (NGOs) and cooperatives and credit unions (Coop/CUs). We explore potential channels through which credit risk is influenced by EPU from the perspectives of earnings volatility and cost. We find that EPU increases the credit risk of MFIs not only by reducing profitability and leverage levels and increasing earnings volatility but also by raising financing costs.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/ijfe.3003

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:wly:ijfiec:v:30:y:2025:i:2:p:1969-1985

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().