International Diversification and Microfinance
22 Pages Posted: 21 Nov 2009
There are 2 versions of this paper
International Diversification and Microfinance
Date Written: May 1, 2009
Abstract
International commercial banks, institutional investors, and private investors have become increasingly interested in financing microfinance institutions (MFIs). This paper investigates whether adding microfinance funds to a portfolio of risky international assets yields diversification gains. By using mean-variance spanning tests with short-sale constraints, the paper indicates that investing in microfinance may be attractive for investors seeking a better risk-return profile. More specifically, the analysis suggests that investing in MFIs from Latin America, or microfinance and rural banks may yield more efficient portfolios. In contrast, adding MFIs from Africa or microfinance NGOs to a benchmark portfolio of international assets does not seem beneficial for a mean-variance investor.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Can Microfinance Reduce Portfolio Volatility?
By Nicolas A. Krauss and Ingo Walter
-
Can Microfinance Reduce Portfolio Volatility?
By Ingo Walter and Nicolas A. Krauss
-
International Diversification and Microfinance
By Rients Galema, Robert Lensink, ...
-
A Survey on Microfinance for Developing Countries: A Social Responsible Investment Opportunity
-
Nonperforming Loans in the GCC Banking System and Their Macroeconomic Effects
By Raphael A. Espinoza and A. Prasad