Consumption, Commercial or Mortgage Loans: Does it Matter for MFIs in Latin America?

Abstract:     
Using data on number of borrowers and loan portfolio by credit type, this paper shows that the specific credit type composition of MFIs in Latin America does matter for their performance. In particular:
• Compared with microenterprise loans, higher shares of consumption loans are associated with higher yields, lower (worse) portfolio quality, and higher profitability.
• More participation of mortgages is associated with smaller MFIs in terms of borrowers, lower operating expenses as percentage of average gross loan portfolio (GLP) and lower yields, higher arrears, and no difference in defaults and profitability levels.
• In comparison with microenterprise loans, higher shares of commercial loans are associated with larger aggregate average loan sizes as percentage of Gross National Income per capita (GNI) and larger MFIs by GLP, higher cost per borrower, lower yields and lower portfolio quality.

Number of Pages in PDF File: 16

Keywords: microfinance, consumption loans, mortage loans, commercial loans, performance

working papers series