Commercialization in Funding and Its Effect on the Social Purpose of Microfinance Institutions

Md Aslam Mia
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Md Aslam Mia: Universiti Sains Malaysia

Chapter Chapter 5 in Social Purpose, Commercialization, and Innovations in Microfinance, 2022, pp 87-120 from Springer

Abstract: Abstract Initially, most of the global microfinance institutions (MFIs) depend heavily on donations/donated equity. However, these capital sources have declined over the last two decades, thereby threatening the achievement of MFIs’ primary objectives. Hence, this chapter aims to evaluate the effect of funding on the social mission of MFIs by applying the conventional panel data regression techniques on a relatively recent (2000–2018) data of 2,937 MFIs (unbalanced), which are obtainable from the World Bank database. Our results revealed that commercial sources of funds have mixed impact on the breadth and depth of outreach. Our study also highlights the different effects of various sources of funds on the social outreach of MFIs following the division of the sample into before and after Global Financial Crisis (GFC). We also noted that large MFIs are pro-poor and have enhanced breadth of outreach. The results further suggest that the utilization of conventional commercial sources of funds strains the simultaneous achievement of the depth and breadth of outreach goals by MFIs. Therefore, our study highlights important funding sources that should be considered by the management of MFIs when raising capital to sustain their social mandate.

Keywords: Capital structure; Funding source; Breadth of outreach; Depth of outreach; Microfinance institutions; Global financial crisis; Social outreach; Microfinance institutions (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-19-0217-8_5

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DOI: 10.1007/978-981-19-0217-8_5

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