DETERMINANTS OF THE PERFORMANCE OF MICROFINANCE INSTITUTIONS: A SYSTEMATIC REVIEW

Niels Hermes, Marek Hudon*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

28 Citations (Scopus)
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Abstract

Microfinance institutions (MFIs) generally aim at improving the access of the poor to financial services while at the same time being financially sustainable. But what do we know about how MFIs reach and combine these two goals? We carry out a systematic review of close to 170 papers discussing the determinants of the financial and social performance of MFIs. The review shows that the most important determinants addressed in the literature are MFI characteristics (size, age and type of organization), their funding sources, the quality of organizational governance and the MFIs' external context such as macro-economic, institutional and political conditions. The evidence on these issues is rather mixed. Moreover, the direction of the relationship between these drivers and MFI performance depends on the context, particularly the country-specific context. Finally, there is a lack of consensus in the literature on the measurement of financial and social performance. Due to the complexity of the concept, we argue that social performance should only be assessed by using a multidimensional perspective. This can be done either by applying recent and holistic social performance measures such as the SPI4, or at least by using a combination of proxies, such as outreach, gender and rural measures.

Original languageEnglish
Pages (from-to)1483-1513
Number of pages31
JournalJournal of Economic Surveys
Volume32
Issue number5
DOIs
Publication statusPublished - Dec-2018

Keywords

  • microcredit
  • microfinance
  • performance
  • FINANCIAL PERFORMANCE
  • MISSION DRIFT
  • SOCIAL PERFORMANCE
  • CORPORATE GOVERNANCE
  • BOARD COMPOSITION
  • GREEN MICROFINANCE
  • TRADE-OFFS
  • EFFICIENCY
  • OUTREACH
  • SUSTAINABILITY

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