Aid Volatility and Social Performance in Microfinance | Zendy

Bert D’Espallier | Zendy; Marek Hudon | Zendy; Ariane Szafarz | Zendy

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Aid Volatility and Social Performance in Microfinance

Author(s) -

Bert D’Espallier,

Marek Hudon,

Ariane Szafarz

Publication year - 2016

Publication title -

nonprofit and voluntary sector quarterly

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 1.098

H-Index - 84

eISSN - 1552-7395

pISSN - 0899-7640

DOI - 10.1177/0899764016639670

Subject(s) - microfinance , volatility (finance) , subsidy , loan , interest rate , business , economics , monetary economics , financial system , public economics , finance , economic growth , market economy

Uncertainty makes objectives harder to reach. This article examines whether uncertainty in subsidies leads to mission drift in microfinance institutions (MFIs). Using a worldwide sample of 1,151 MFIs active in 104 countries, we find that interest rates increase with aid volatility while average loan size (ALS) is inversely related to aid volatility. These results suggest that MFIs consider ALS as a signaling device for commitment to their social mission, but use interest rates as an adjustment variable to cope with uncertainty. The policy prescription to donor agencies wishing to curtail the rise in interest rates is to deliver subsidies predictably and transparently.SCOPUS: ar.jinfo:eu-repo/semantics/publishe

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