Geographic diversification and credit risk in microfinance

Stephen Zamore, Leif Atle Beisland and Roy Mersland

EconStor Open Access Articles and Book Chapters, 2019, vol. 109, No 105665, 13 pages

Abstract: This paper examines the relation between geographic diversification and credit risk in microfinance. The empirical findings from the banking industry are mixed and inconclusive. This study extends the discussion into a new international setting: the global microfinance industry with lenders having both social and financial objectives. Using a large global sample of microfinance institutions (MFIs), we find that geographic diversification comes with more credit risks. However, this finding is more pronounced among non-shareholder MFIs like NGOs and cooperatives, compared to shareholder-owned MFIs. Moreover, the results show that MFIs can mitigate the effect of geographic diversification on risk with group lending methodology.

Date: 2019
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Journal Article: Geographic diversification and credit risk in microfinance (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:323833

DOI: 10.1016/j.jbankfin.2019.105665

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