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Determinants of the Performance of Microfinance Institutions: A Systematic Review

Niels Hermes () and Marek Hudon

No 18-024, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: Microfinance institutions (MFIs) generally aim at improving the access of the poorto financial services while at the same time being financially sustainable. Butwhat do we know about how MFIs reach and combine these two goals? We carryout a systematic review of close to 170 articles discussing the determinants ofthe financial and social performance of MFIs. The review shows that the mostimportant determinants addressed in the literature are MFI characteristics (size,age, type of organization), their funding sources, the quality of organizationalgovernance and the MFIs’ external context such as macroeconomic, institutionaland political conditions. The evidence on these issues is rather mixed. Moreover,the direction of the relationship between these drivers and MFI performancedepends on the context, particularly the country-specific context. Finally, there isa lack of consensus in the literature on the measurement of financial and socialperformance. Due to the complexity of the concept, we argue that socialperformance should only be assessed by using a multidimensional perspective.This can be done either by applying recent and holistic social performancemeasures such as the SPI4, or at least by using a combination of proxies, suchas outreach, gender and rural measures.

Keywords: microfinance; performance; social performance; governance; microcredit (search for similar items in EconPapers)
JEL-codes: B00 O16 Q14 (search for similar items in EconPapers)
Pages: 61 p.
Date: 2018-07-05
New Economics Papers: this item is included in nep-hme
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