Sustainability of microfinance institutions in financial crisis

The aim of this paper is to clarify the problems of microfinance and the sustainability of microfinance institutions (MFI) in financial crisis. We find, that MFIs are often considered as one of the most effective and flexible strategies in the fight against global poverty. Due to several often unsolvable problems obstructing easier and faster development of these institutions such as: ethnical problems, managerial resources, legal recourses, unfortunate recourses and other, the operations of MFIs are often not sufficiently efficient. The microfinance sector is in general known for its adaptability and quite healthy survival of past financial crises. However, current global financial crisis is testing the resilience of MFIs hardly. The MFIs are much more connected to international financial markets now that it was the case during previous crises. Therefore we expect that they will not survive the crisis without bearing some loses. But the expected losses are relatively smaller when compared to other financial institutions.Financial crisis; Microfinance; Microcredit; MFIs

Opportunities in microfinance risk management

This paper examines the main risk management opportunities and threats, which microfinance institutions (MFIs) are exposed to. Awareness and understanding of these indicators can make the evolution of microfinance more accurate and simultaneously can help to locate the microfinance market in the broader picture of economic development. Growing competition improves the current situation for borrowers, because it leads to acceptable interest rates policy and expansion of existing microfinance services. At the same time, intense competition may represent threats, if the rules of regulation and supervision are not properly set. In this regard, we believe that the future of microfinance will significantly depend on the linkage between MFIs and financial markets, especially in the light of access to an alternative source of funding, the possibility of securitization and other complementary services

The Impact of Public Spending on the Performance of Microfinance Institutions

This paper investigates the role of public expenditures and general government debt in microfinance performance. Our panel regression applied to the data of microfinance institutions (MFIs) in Latin America and the Caribbean confirms the high significance of public finance for the growth of MFIs, especially for the size of their total assets and for their yield on gross loan portfolio. Moreover, the results indicate that MFIs, operating in the country with higher growth of GDP, are characterized by higher rate of social efficiency. The positive influence on microfinance is besides public finance also associated with a growth of rural population or an economy openness of the given country

The Impact of Public Spending on the Performance of Microfinance Institutions

This paper investigates the role of public expenditures and general government debt in microfinance performance. Our panel regression applied to the data of microfinance institutions (MFIs) in Latin America and the Caribbean confirms the high significance of public finance for the growth of MFIs, especially for the size of their total assets and for their yield on gross loan portfolio. Moreover, the results indicate that MFIs, operating in the country with higher growth of GDP, are characterized by higher rate of social efficiency. The positive influence on microfinance is besides public finance also associated with a growth of rural population or an economy openness of the given country

Survey of Microfinance Controversies and Challenges

This survey article provides a brief but comprehensive overview of microfinance academic literature with emphasis on recent innovations, trends and efficiency. In particular, we focus on controversial issues of microfinance, such as commercialization, regulation, interest rate policy and the balance between outreach and performance of MFIs. In summary, the findings of the reviewed literature underline the great improvement in the microfinance field that, however, has not reached its full potential yet. At the same time, we outline potential risks and drawbacks which are being discovered along the way of microfinance development and maturing, many of which still waiting for more rigorous scholarly examination. The paper also contains an illustrative econometric model of the relation between social and financial efficiency

Macroeconomic factors influencing interest rates of microfinance institutions in Latin America

Agricultural output in developing countries still represents a substantial part of GDP. This ratio has actually increased in some areas such as Latin America. As such, there is an increasing importance of microfinance institutions (MFIs) focusing on activities associated with agriculture and encouraging entrepreneurship in agriculture and in the rural communities in general. The contribution of microfinance institutions consists mainly in providing special-purpose loans, usually without collateral. However, questions exist as to the magnitude and adequate level of risk of providing micro-credit loans in relation to the interest rates being charged. We review two main approaches to setting interest rates in MFIs. One approach takes the view that interest rates should be set at a high level due to the excessive risk that these institutions undertake. The second approach is to convince the public of the possibility of reducing these rates through cost savings, increased efficiency, and sharing best practice, etc. Subsequently we econometrically analyse the impact of macroeconomic factors on microfinance interest rates in Latin America and the Caribbean. We show that these results depend on the chosen indicator of interest rate

MIKROFINANČNÍ REVOLUCE: AKTUÁLNÍ KONTROVERZE A VÝZVY

This paper provides a brief but comprehensive overview of microfinance academic literature with emphasis on recent innovations, trends and efficiency. In particular, we focus on controversial issues of microfinance, such as commercialization, regulation, interest rate policy and the balance between outreach and performance of MFIs. In summary, the findings of the reviewed literature underline the great improvement in the microfinance field that, however, has not reached its full potential yet. At the same time, we outline potential risks and drawbacks which are being discovered along the way of microfinance development and maturing, many of which still waiting for more rigorous scholarly examination

Macroeconomic factors influencing interest rates of microfinance institutions in Latin America

Agricultural output in developing countries still represents a substantial part of GDP. This ratio has actually increased in some areas such as Latin America. As such, there is an increasing importance of microfinance institutions (MFIs) focusing on activities associated with agriculture and encouraging entrepreneurship in agriculture and in the rural communities in general. The contribution of microfinance institutions consists mainly in providing special-purpose loans, usually without collateral. However, questions exist as to the magnitude and adequate level of risk of providing micro-credit loans in relation to the interest rates being charged. We review two main approaches to setting interest rates in MFIs. One approach takes the view that interest rates should be set at a high level due to the excessive risk that these institutions undertake. The second approach is to convince the public of the possibility of reducing these rates through cost savings, increased efficiency, and sharing best practice, etc. Subsequently we econometrically analyse the impact of macroeconomic factors on microfinance interest rates in Latin America and the Caribbean. We show that these results depend on the chosen indicator of interest rate

Vliv externího financování na mikrofinanční rozvoj - makro perspektiva

Microfinance institutions (MFIs) finance their business activities primary with clients’ deposits, equity or with external funding. The aim of our thesis is to determine whether macroeconomic development and the size of banking sector affect the range of external funding and consequently the importance of these external debt sources for microfinance performance. Our findings reveal that the growth of external sources is positively influenced by economic grow, level of corruption, unemployment or under certain conditions by the development of banking sector, as well. Likewise, their presence can have a positive impact on the number of clients, portfolio quality, margin or cost policy of MFIs. The opposite effect can appear if the ratio of external funding to total assets is being uncontrollably increased over time

Sustainability of microfinance institutions in financial crisis

The aim of this paper is to clarify the problems of microfinance and the sustainability of microfinance institutions (MFI) in financial crisis. We find, that MFIs are often considered as one of the most effective and flexible strategies in the fight against global poverty. Due to several often unsolvable problems obstructing easier and faster development of these institutions such as: ethnical problems, managerial resources, legal recourses, unfortunate recourses and other, the operations of MFIs are often not sufficiently efficient. The microfinance sector is in general known for its adaptability and quite healthy survival of past financial crises. However, current global financial crisis is testing the resilience of MFIs hardly. The MFIs are much more connected to international financial markets now that it was the case during previous crises. Therefore we expect that they will not survive the crisis without bearing some loses. But the expected losses are relatively smaller when compared to other financial institutions