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The Performance of Microfinance Institutions: Do Macro Conditions Matter?

In: The Handbook Of Microfinance

Author

Listed:
  • Niels Hermes

    (Faculty of Economics and Business, University of Groningen, Netherlands)

  • Aljar Meesters

    (Faculty of Economics and Business, University of Groningen, Netherlands)

Abstract

This paper analyzes whether the performance of microfinance institutions (MFIs) is associated with the macro conditions these institutions are confronted with. The analysis focuses on the macroeconomic, financial development, institutional and political variables as potentially important features of the macro conditions influencing the performance of MFIs. We measure performance in terms of the cost-efficiency of MFI operations. We find that economic growth and financial development are clearly and robustly associated with MFI efficiency. For institutional and political conditions, the picture is less obvious: while some dimensions of the institutional and political environment seem to be associated with efficiency, the general conclusion is that we cannot find a clear relationship between the two dimensions and the efficiency of MFIs.

Suggested Citation

  • Niels Hermes & Aljar Meesters, 2011. "The Performance of Microfinance Institutions: Do Macro Conditions Matter?," World Scientific Book Chapters, in: Beatriz Armendáriz & Marc Labie (ed.), The Handbook Of Microfinance, chapter 9, pages 173-201, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814295666_0009
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    Citations

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    Cited by:

    1. Hanousek, Jan & Alimukhamedova, Nargiza, 2015. "What Do We Know about Microfinance at Macro Glance?," CEPR Discussion Papers 10484, C.E.P.R. Discussion Papers.
    2. Muneer Babu M., 2016. "Macroeconomic Determinants of Technological Change in Indian Microfinance Institutions," Global Business Review, International Management Institute, vol. 17(5), pages 1179-1195, October.
    3. Tchakoute-Tchuigoua, Hubert, 2012. "Active risk management and loan contract terms: Evidence from rated microfinance institutions," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(4), pages 427-437.
    4. Nicolas A. LASH & Bala BATAVIA, 2016. "Government Policies And Micro Lending In Emerging Markets," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 17, pages 9-32, June.

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