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The impact of COVID-19 on the efficiency of microfinance institutions

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  • Zheng, Chen
  • Zhang, Junru

Abstract

This study investigates the effect of the COVID-19-induced decline in economic activities on the financial and social efficiency of microfinance institutions (MFIs). We find that the pandemic-induced impact decreases the financial efficiency of MFIs; however, the social efficiency of MFIs is increased under the impact of COVID-19. To explore potential channels through which efficiency is influenced by the COVID-19 outbreak, we examine the supply and demand side of MFIs’ funding. We find that the lending rate mediates the relationship between the impact of COVID-19 and MFI efficiency, whereas the mediating role of the funding rate is negligible.

Suggested Citation

  • Zheng, Chen & Zhang, Junru, 2021. "The impact of COVID-19 on the efficiency of microfinance institutions," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 407-423.
    • Handle: RePEc:eee:reveco:v:71:y:2021:i:c:p:407-423
    DOI: 10.1016/j.iref.2020.09.016
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    3. Sakouvogui Kekoura & Guilavogui Mama Genevieve, 2022. "How are the United States Banks faring during the COVID-19 Pandemic? Evidence of Economic Efficiency Measures," Open Economics, De Gruyter, vol. 5(1), pages 11-29, January.
    4. F. S. Fall & H. Tchakoute Tchuigoua & A. Vanhems & L. Simar, 2023. "Investigating the unobserved heterogeneity effect on outreach to women: lessons from microfinance institutions," Annals of Operations Research, Springer, vol. 328(2), pages 1365-1386, September.
    5. Abhirupa Das & Uday Bhanu Sinha, 2022. "Microfinance institution and moneylenders in a segmented rural credit market," Working papers 324, Centre for Development Economics, Delhi School of Economics.
    6. Sha, Yezhou & Zhang, Yong & Lu, Xiaomeng, 2022. "Household investment diversification amid Covid-19 pandemic: Evidence from Chinese investors," Finance Research Letters, Elsevier, vol. 47(PA).
    7. Cristi Spulbar & Lucian Claudiu Anghel & Ramona Birau & Simona Ioana Ermiș & Laurențiu-Mihai Treapăt & Adrian T. Mitroi, 2022. "Digitalization as a Factor in Reducing Poverty and Its Implications in the Context of the COVID-19 Pandemic," Sustainability, MDPI, vol. 14(17), pages 1-26, August.
    8. Shamsuddin Ahamad & Hamdan Amer Ali Al-Jaifi & Kizito Uyi Ehigiamusoe, 2023. "Impact of Intellectual Capital on Microfinance Institutions’ Efficiency: the Moderating Role of External Governance," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(2), pages 691-717, June.
    9. Czura, Kristina & Englmaier, Florian & Ho, Hoa & Spantig, Lisa, 2022. "Microfinance loan officers before and during Covid-19: Evidence from India," World Development, Elsevier, vol. 152(C).
    10. Narayan, Paresh Kumar, 2021. "COVID-19 research outcomes: An agenda for future research," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 439-445.
    11. Vu, Son T. & Le, Tam T. & Nguyen, Chi N. L. & Le, Duong T. & Le, Phuc H. & Truong2, Ha K., 2021. "COVID-19 Pandemic, Stimulus Packages and Stock Returns in Vietnam," OSF Preprints z573c, Center for Open Science.
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    13. Dian Perwitasari & Doddy Setiawan & An Nurrahmawati & Isna Putri Rahmawati, 2022. "Firm Performance during COVID-19 Pandemic: Does Ownership Identity Matter? Evidence from Indonesia," JRFM, MDPI, vol. 15(10), pages 1-18, September.
    14. Saeid Homayoun & Mohammad Ali Bagherpour Velashani & Bashaer Khdhair Abbas Alkhafaji & Siham Jabbar Mezher, 2023. "The Effect of COVID-19 on the Performance of SMEs in Emerging Markets in Iran, Iraq and Jordan," Sustainability, MDPI, vol. 15(10), pages 1-14, May.
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    More about this item

    Keywords

    Microfinance institutions; Financial efficiency; Social efficiency; COVID-19;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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