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Resilience of Microfinance Institutions to National Macroeconomic Events: An Econometric Analysis of MFI asset quality

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  • Gonzalez, Adrian

Abstract

After controlling for MFI and country characteristics, we find no evidence suggesting a strong (in magnitude) and statistically significant relationship between changes in GNI per capita (GROWTH) and four indicators of MFI portfolio risk: quality at Risk over 30 Days (PAR-30), Portfolio at Risk over 90 Days (PAR-90), Loan loss Rate (LLR), and Write-off Ratio (WOR). We test the robustness of the models with different specifications that confirm the general result and test for different impact from growth rates according to average loan sizes disbursed by MFIs. These tests suggest that microfinance portfolios have high resilience to economic shocks. Specifically, we found only a significant relationship between growth and PAR-30. We also control for other explanatory variables like size, age, average loan size, and productivity.

Suggested Citation

  • Gonzalez, Adrian, 2007. "Resilience of Microfinance Institutions to National Macroeconomic Events: An Econometric Analysis of MFI asset quality," MPRA Paper 4317, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:4317
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    References listed on IDEAS

    as
    1. Xavier Gine & Dean Karlan, 2006. "Group versus Individual Liability: A Field Experiment in the Philippines," Working Papers 940, Economic Growth Center, Yale University.
    2. Robert Cull & Asli Demirguç-Kunt & Jonathan Morduch, 2007. "Financial performance and outreach: a global analysis of leading microbanks," Economic Journal, Royal Economic Society, vol. 117(517), pages 107-133, February.
    3. Beatriz Armendariz & Jonathan Morduch, 2007. "The Economics of Microfinance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512017, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Microfinace; Assets Quality; Systemic Shocks; Repayment; Resilience;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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