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The Impact of High Microfinance Growth on Loan Portfolio
Author(s) -
Yimga Jules
Publication year - 2016
Publication title -
journal of international development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.533
H-Index - 66
eISSN - 1099-1328
pISSN - 0954-1748
DOI - 10.1002/jid.3144
Subject(s) - microfinance , portfolio , outreach , economics , loan , quality (philosophy) , financial system , monetary economics , financial economics , macroeconomics , economic growth , philosophy , epistemology
Most empirical studies in microfinance have disproportionately focused on its downstream effects—effects on the borrower—leaving the important question of how microfinance institutions are affected in the process, largely unanswered—upstream effects. This paper addresses this question by using panel data estimations to empirically investigate the causal effect of microfinance growth on microfinance institution loan portfolio quality. Surprisingly, we find evidence that portfolio quality improves with growth in outreach, which is contrary to the dominant view that higher growth leads to increased default risk. This result is robust across estimation methods and even after controlling for microfinance institutional characteristics and macroeconomic indicators. Copyright © 2015 John Wiley & Sons, Ltd.