The Role of Subsidization and Organizational Status on Borrower Repayment Rates in Microfinance Institutions

39 Pages Posted: 27 May 2015

Date Written: August 1, 2014

Abstract

We use multilevel analysis to examine the effect of different types of external funding (donations vs. subsidies) on microfinance institutions’ borrower repayment rates. Using information on 947 MFIs over a 10-year period we find that private funding is positively related to MFIs’ abilities to screen borrowers and to monitor borrower repayment rates. We also find that MFIs that have a higher proportion of private donor funds to public subsidies have lower rates of portfolios at risk, fewer delinquent loans, and that their overall portfolios are less risky. Finally, we find that diverse organizational structures have a distinct impact on MFI loan portfolios.

Keywords: microfinance, donation, subsidy, borrower, repayment rate, MFI

JEL Classification: O, E5

Suggested Citation

Pylypiv, Mariya Ihorivna and Chakravarty, Sugato, The Role of Subsidization and Organizational Status on Borrower Repayment Rates in Microfinance Institutions (August 1, 2014). World Development, Vol. 66, February 2015, Available at SSRN: https://ssrn.com/abstract=2581662

Mariya Ihorivna Pylypiv (Contact Author)

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

No contact information is available for Sugato Chakravarty

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