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Deposit‐borrowing substitutability: Evidence from microfinance institutions around the world

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  • Usman Shettima
  • Nazam Dzolkarnaini

Abstract

Drawing from 645 microfinance institutions across 56 countries, this paper examines the deposit‐borrowing dynamic of microfinance institutions' source of capital. We find that deposits and borrowings are substitutes rather than complements. We further find that the degree of substitutability is more pronounced among microfinance institutions operating in a developed financial sector where the level of information asymmetry is lower. Our findings represent novel contribution in understanding microfinance institutions' funding behaviour that supports its quest for further growth and long‐term sustainability.

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  • Usman Shettima & Nazam Dzolkarnaini, 2024. "Deposit‐borrowing substitutability: Evidence from microfinance institutions around the world," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3326-3343, July.
    • Handle: RePEc:wly:ijfiec:v:29:y:2024:i:3:p:3326-3343
    DOI: 10.1002/ijfe.2817
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