Is the Model “Loans‐Plus‐Savings” Better for Microfinance in Eastern Europe and Central Asia? A Propensity Score Matching Comparison

22 Pages Posted: 5 Jun 2020

See all articles by Knar Khachatryan

Knar Khachatryan

American University of Armenia

Vardan Baghdasaryan

American University of Armenia

Valentina Hartarska

Auburn University - Department of Agricultural Economics and Rural Sociology; Auburn University - Department of Finance

Date Written: August 2019

Abstract

Microfinance institutions are gradually evolving into multiservice organizations offering not only loans but also savings, and other financial and nonfinancial services. We contribute to the literature aimed at identifying how combining credit with savings affects outreach and sustainability in microfinance institutions (MFIs). We apply the propensity score matching method as well as its augmented dose–response version to compare the performance of loans‐plus‐savings MFIs with that of lending‐only in a sample of 710 observations from Eastern Europe and Central Asia. Owing to our unique capital structure data, we control for the use of subsidized capital, which related work ignores while existing evidence points to tradeoffs between subsidies and savings. We find that financial performance and breadth of outreach are positively associated with savings mobilization, while the evidence on depth of outreach points to a possible mission drift.

Keywords: economies of scope, Microfinance institutions, performance, propensity score matching, savings

Suggested Citation

Khachatryan, Knar and Baghdasaryan, Vardan and Hartarska, Valentina, Is the Model “Loans‐Plus‐Savings” Better for Microfinance in Eastern Europe and Central Asia? A Propensity Score Matching Comparison (August 2019). Review of Development Economics, Vol. 23, Issue 3, pp. 1309-1330, 2019, Available at SSRN: https://ssrn.com/abstract=3618467 or http://dx.doi.org/10.1111/rode.12589

Knar Khachatryan (Contact Author)

American University of Armenia ( email )

40, Baghramyan Ave.
Yerevan, 0019
United States

Vardan Baghdasaryan

American University of Armenia ( email )

40, Baghramyan Ave.
Yerevan, 0019
United States

Valentina Hartarska

Auburn University - Department of Agricultural Economics and Rural Sociology ( email )

Comer Hall
Auburn, AL 36849
United States

Auburn University - Department of Finance ( email )

Auburn, AL 36849
United States

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