Explaining Failures of Microfinance Institutions

44 Pages Posted: 28 Aug 2013 Last revised: 25 Jan 2017

See all articles by Gregor Dorfleitner

Gregor Dorfleitner

University of Augsburg - Department of Statistics and Mathematical Economic Theory; University of Regensburg - Department of Finance

Michaela Leidl

University of Regensburg

Christopher Priberny

Deutsche Bundesbank - Deutsche Bundesbank University of Applied Sciences; University of Regensburg

Date Written: August 21, 2014

Abstract

We empirically study the determinants of failures of microfinance institutions based on the CAMELS rating components and microfinance-specific measures by applying probit regression techniques. Our findings confirm the capital adequacy (C), the asset quality (A), the management capability (M), the earnings (E), and the sensitivity to market risk (S) as explaining factors of failures of microfinance institutions.Regarding microfinance-specific effects, there is a positive influence of the percentage of female borrowers on the likelihood of failure. Moreover, we find evidence that regulation, the presence of donations, and the rapid growth of an MFI affect the probability of failure.

Keywords: microfinance, MFI failure, CAMELS, regulation, gender

JEL Classification: G21, G23, G32, L26

Suggested Citation

Dorfleitner, Gregor and Dorfleitner, Gregor and Leidl, Michaela and Priberny, Christopher, Explaining Failures of Microfinance Institutions (August 21, 2014). Available at SSRN: https://ssrn.com/abstract=2316680 or http://dx.doi.org/10.2139/ssrn.2316680

Gregor Dorfleitner

University of Augsburg - Department of Statistics and Mathematical Economic Theory ( email )

Augsburg, 86135
Germany

University of Regensburg - Department of Finance ( email )

Regensburg, 93040
Germany

Michaela Leidl

University of Regensburg ( email )

93040 Regensburg
D-93040 Regensburg, 93053
Germany

Christopher Priberny (Contact Author)

Deutsche Bundesbank - Deutsche Bundesbank University of Applied Sciences ( email )

Schloss
Hachenburg, 57627
Germany

University of Regensburg ( email )

93040 Regensburg
D-93040 Regensburg, 93053
Germany

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