Do Microfinance Institutions Trade Off Financial and Social Performance? Exploring the Business Cycle and the Funding Channels

44 Pages Posted: 20 Jul 2024

See all articles by Hélyoth Hessou

Hélyoth Hessou

Université de Sherbrooke; Université de Sherbrooke

Hubert Tchakoute Tchuigoua

KEDGE Business School

Issouf Soumaré

Laval University

Abstract

Microfinance institutions (MFIs) contribute to financial inclusion in developing countries but face the challenge of being profitable while serving the poor and the excluded, especially in times of economic downturn. This study examines whether MFIs trade off their social mission (depth of outreach) with their goal of profitability or self-sufficiency over the business cycle. Using an international sample of 2,214 MFIs from 2002 to 2018, we find evidence of mission drift for for-profit MFIs, meaning that these MFIs target wealthier clients to increase their profitability. Non-profit MFIs, on the other hand, which are more concerned with outreach, are more likely to adhere to their social mission over the business cycle. We also find that donor support acts as a moderating factor, reducing the trade-off between social performance and financial performance. Moreover, the business cycle does not play a significant role in amplifying or attenuating the relationship between the two performance measures.

Keywords: Social performance, financial performance, Trade-off, Exogenous chocks, Business cycle

Suggested Citation

Hessou, Hélyoth and Hessou, Hélyoth and Tchuigoua, Hubert Tchakoute and Soumaré, Issouf, Do Microfinance Institutions Trade Off Financial and Social Performance? Exploring the Business Cycle and the Funding Channels. Available at SSRN: https://ssrn.com/abstract=4900452 or http://dx.doi.org/10.2139/ssrn.4900452

Hélyoth Hessou (Contact Author)

Université de Sherbrooke ( email )

Sherbrooke, Québec J1K 2R1
Canada
J1K 2R1 (Fax)

Université de Sherbrooke ( email )

2500, boulevard de l'Université, Ecole
de gestion, Campus principal (Pav K1)
Sherbrooke, Québec J1K 2R1
Canada
J1K 2R1 (Fax)

Hubert Tchakoute Tchuigoua

KEDGE Business School ( email )

Domaine de Luminy - BP 921
BP 921
Marseille, PACA 13288
France

Issouf Soumaré

Laval University ( email )

Faculty of Business Administration
Department of Finance, Insurance and Real Estate
Quebec, Quebec G1V 0A6
Canada
1418 656 3423 (Phone)
1418 656 2624 (Fax)

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