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Optimal sources of financing for microfinance institutions in sub-Saharan Africa

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  • Sydney Chikalipah

Abstract

This article studies the relationship between different sources of finance and the financial performance of microfinance institutions in 36 sub-Saharan African countries. The analysis is based on a panel dataset of 471 microfinance institutions over the period 1995 to 2012. By applying the GMM estimator, the results suggest that first, there is a positive and robustly significant relationship between equity and the financial performance of microfinance institutions; and second, debt and microsavings negatively affect the financial performance of microfinance institutions in the sub-Saharan African region. Therefore, the optimal source of finance for microfinance institutions in sub-Saharan Africa is equity. More importantly, the policy recommendation is that private or public partners must support MFIs financially; doing so could contribute to extending financial services to the poor in sub-Saharan Africa.

Suggested Citation

  • Sydney Chikalipah, 2019. "Optimal sources of financing for microfinance institutions in sub-Saharan Africa," Development in Practice, Taylor & Francis Journals, vol. 29(3), pages 395-405, April.
    • Handle: RePEc:taf:cdipxx:v:29:y:2019:i:3:p:395-405
    DOI: 10.1080/09614524.2018.1519011
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