Microfinance Performance in the OIC Member States – Does Regulation Status Matter?
22 Pages Posted: 27 Nov 2018
Date Written: July 25, 2018
Despite the emerging concern of mission drift, microfinance institutions (MFIs) in various developing nations have been commercializing and transforming into regulated financial intermediaries. However, a hidden dread is still alive until it is disclosed that the regulated MFIs are actually performing better in both of their financial and social obligations. Hence, this study aims to investigate the effect of regulatory status on the performance of MFIs, using a panel dataset containing 285 observation years from 23 OIC member states. A robust estimation of OLS techniques to the general form of cross-sectional and temporal dependency were applied. The findings do not show any significant evidence that the regulatory status affects the profitability of MFIs. However, the result indicates that the regulated MFIs decrease their outreach to female clientele. The study additionally reveals that the interest rates accelerate the profitability, but it does not necessarily harm the outreach.
Keywords: microfinance, OIC, outreach, profitability, regulation
JEL Classification: G21, L25
Suggested Citation: Suggested Citation