The drivers of the financial integration of microfinance Institutions: Do financial development, agency costs and microfinance performance matter?

Sandra Kendo and Josephine Tchakounte
Additional contact information
Sandra Kendo: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique
Josephine Tchakounte: Faculty of Economics, University of Lomé

Post-Print from HAL

Abstract: The aim of this paper is to identify the drivers that could increase the financial integration of microfinance institutions with commercial banks. Importantly, financial integration ensures the sustainable growth of microfinance institutions through the provision of more financial resources, if needed. To identify these drivers, we used a panel dataset of 953 microfinance institutions (MFIs) from the MIX market dataset and country-level data from the World Bank for the 2003–2016 period. We applied a panel quantile approach with nonadditive fixed effects. Our results reveal that an increase in financial development slows the financial integration of MFIs. However, considering the transitory aspect of financial integration by each quantile, it appears that financial development positively impacts the financial integration of MFIs. The impact of financial development increases as the financial integration level increases. Similar results show a positive link between agency costs and financial integration. More financial interconnections with commercial banks justify the appearance of high agency costs due to an increased interest of commercial banks. There is a significant and negative link between the profitability of MFIs and their financial integration. Moreover, the results reveal that financial integration is a significant determinant of mission drift occurrence in client portfolios.

Keywords: Financial integration; Microfinance; Financial development; Agency costs; Financial performance and outreach (search for similar items in EconPapers)
Date: 2022-05
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Published in Quarterly Review of Economics and Finance, 2022, 84, pp.128-142. ⟨10.1016/j.qref.2022.01.016⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:hal:journl:hal-03702613

DOI: 10.1016/j.qref.2022.01.016

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().