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A causality approach in the analysis of the trade-off between financial sustainability and outreach

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  • Ponce, L. Arturo Bernal
  • Rocha, Adriana Ramírez
  • Navarro, Ricardo Pérez

Abstract

This study reviews the causality between financial sustainability and depth of outreach for microfinance institutions in six regions. We performed a panel unit root analysis, revealing the data's stationarity both individually and regionally. The Granger causality analysis showed that Outreach, adjusted for the poorest 20%, causes financial sustainability in South Asia and Latin America. The research also proved bidirectional causality between Outreach and financial sustainability in East Asia and the Pacific. Our results imply an improvement in the model specification when analyzing the trade-off between financial sustainability and outreach in MFIs of those regions, which is useful for forecasting purposes.

Suggested Citation

  • Ponce, L. Arturo Bernal & Rocha, Adriana Ramírez & Navarro, Ricardo Pérez, 2021. "A causality approach in the analysis of the trade-off between financial sustainability and outreach," Finance Research Letters, Elsevier, vol. 42(C).
    • Handle: RePEc:eee:finlet:v:42:y:2021:i:c:s1544612321000015
    DOI: 10.1016/j.frl.2021.101920
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    More about this item

    Keywords

    Econometric methodology; Causality; Microfinance; Poverty alleviation; Firm goal; Firm profit;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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