Microfinance and Financial Sector Development
Annabel Vanroose and
Bert D’Espallier
No 09-040.RS, Working Papers CEB from ULB -- Universite Libre de Bruxelles
Abstract:
This paper analyzes the relationship between performance of microfinance institutions (MFIs) and the development of the formal financial sector of the country in which the MFI is active. We find that MFIs reach more clients and are more profitable where access to the formal financial system is low. This finding is in line with the market-failure hypothesis: MFIs respond to a need that banks do not fulfill and flourish where the formal banking sector fails. However, we also find indications of interdependencies between MFI-performance and formal financial sector development. First, MFIs are less profitable where interest rates are higher reflecting the fact that MFIs depend upon the domestic banking system for additional funding. Secondly, MFIs are less profitable where inflation is high, suggesting that MFIs benefit from stability of the formal financial system. Overall, the results show that the macro-economic environment is crucial to fully understand MFI-performance and that outreach and accordingly impact of MFIs are contingent on financial sector development.
Keywords: O16; O50; G21 (search for similar items in EconPapers)
Pages: 41 p.
Date: 2009
New Economics Papers: this item is included in nep-dev and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)
Published by:
Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/5432 ... ol_wpaper_09-040.pdf RePEc_sol_wpaper_09-040 (application/pdf)
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:sol:wpaper:09-040
Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... ulb.ac.be:2013/54326
Access Statistics for this paper
More papers in Working Papers CEB from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels ().