Microfinance During the Global Financial Crisis (2007–2009): Are There Lessons from COVID-19?

Sunil Sangwan and Md Aslam Mia

Chapter 14 in Banking Resilience and Global Financial Stability, 2024, pp 375-396 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Although many economic, social, and environmental crises have occurred in the past, the recent novel coronavirus (COVID-19) disease is believed to have generated the most severe impact worldwide. Motivated by the lack of data from the global microfinance sector with respect to COVID-19, we have attempted to understand the effect of the pandemic on the microfinance industries through the lens of the 2007–2009 Global Financial Crisis (GFC). In so doing, global data of 2,995 microfinance institutions (MFIs) from 2000 to 2018 were analyzed, highlighting the effect of the GFC on the outreach and financial objectives of MFIs. Our assessment revealed that the GFC mostly had a negative impact on the dual goals of MFIs. Most importantly, the GFC triggered the transformation of the legal status of MFIs from Non-Governmental Organizations (NGOs) to other types (e.g., non-bank financial institutions). Similar outcomes are expected in the aftermath of the COVID-19 in the microfinance industries.

Keywords: Bank capital; Capital Buffers; Financial Stability; Macroprudential Regulation; Systemic Risks; Accounting Standards; Bank Stability; Financial Reporting; Local GAAP; IAS/IFRS; Lending Risk; Bank Capitalization; Bank Risk-Taking; Credit Risk; Asian Banks; Stability; Financial Development; Banking System; Growth; Regression; Human Resources; Trade: Population; Emerging Economies; Human Capital; Financial Stability; Intellectual Capital Efficiency; Human Capital Efficiency; Structural Capital Efficiency; Relational Capital Efficiency; Resources Based Theory; System Generalize Method of Moments; Competitive Environment; Islamic Banks; Asian Countries; Banking; Regulatory Capital; Bank Performance; Basel Accord; Profitability; Risk; Minimal Capital Requirements; Political Instability; Bank Supervision; 2SLS; Financial Institutions; Bank Holding Companies; Great Recession: FDIC; Financial Markets; Financial Crises; Economic Recessions; Heterogeneity; Systemic Risk; Dodd Frank; Foreign Exchange; Systemic Risk; Turkish Banking Sector; Volatility; Foreign Loans; Domestic Loans; Total Assets; Total Credits; Total Deposits; Interest Rates; Financial Crisis; Risk Management; Competency Development; Banks; Integrated; Resilience; Uncertainty; Pandemic; Risk; Actionable; Financial Stability; Systemic Risk; Crisis Management; Bank Recovery and Resolution; Capital Requirements; Climate Physical Risk; Climate Transition Risk; Digital Finance; Safety Net; Twin Transition; Market Illiquidity; Monetary Policy; Bank Lending Channel; Banks; Shocks; Loan Supply; OECD Countries; Financial Crisis; Interest Rates; Transmission Mechanism; European Monetary Union; European Central Bank; ECB Governing Council; Expansionary Monetary Policy; Trilemma; TARGET2-Balance; Inflation; Transmission Protection Instrument (TPI); ECB Anti-Fragmentation Instrument; Pandemic Emergency Purchase Program (PEPP); Credit-to-GDP Gap; Out-of-Sample Forecasts; Augmented Credit Gap; Countercyclical Capital Buffer; Credit Gap; Decision-making Process; Basel Gap; Forecasting Gaps; One-Sided Gap Series; Two-Sided Gap Series; Altman; Z-Score; Economic Distress; Kazakhstan; Banks; Emerging Market; Multiple Discriminant Analysis; Financial Health; Prediction Accuracy; Wilks' Approach; Direct Approach; Microfinance; Microfinance Institutions; Global Financial Crisis; Covid-19; Social Outreach; Financial Sustainability; Operational Self-Sufficiency; NGOs; Capital Structure; Legal Status; Liquidity Hoarding; Economic Policy Uncertainty; Qatari Banks; Islamic Banks; Endogeneity; Instrumental Variable Approach; Economic Blockade; Asset-Side Liquidity Hoarding; Liability-Side Liquidity Hoarding; Gulf Cooperation Council (search for similar items in EconPapers)
JEL-codes: G2 G21 G24 G28 (search for similar items in EconPapers)
Date: 2024
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