Do Microfinance Institutions Benefit from Integrating Financial and Nonfinancial Services?

Abstract

This article examines the impact of microfinance ‘plus’ (i.e. coordinated combination of financial and nonfinancial services) on the performance of microfinance institutions (MFIs). Using a global data set of MFIs in 77 countries, we find that the provision of nonfinancial services does not harm nor improve MFIs’ financial sustainability and efficiency. The results however suggest that the provision of social services is associated with improved loan quality and greater depth of outreach.

Keywords: Microfinance ‘plus’, business development services, outreach, financial sustainability

JEL Classification: G21, O16, C23