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Do migrants’ deposits reduce microfinance institutions’ liquidity risk?

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  • Ritha Sukadi Mata

Abstract

This paper is devoted to the analysis of liquidity risk in microfinance. Using a re-sampling method, we estimate withdrawal rate distributions for migrants’ and locals’ deposits, using an original database of 7,828 deposit contracts issued between 2002 and 2008 by 12 village banks belonging to a major Malian rural microfinance network (PASECA-Kayes). Results show that migrants tend more than locals to default on their deposit contracts. The deposits at risk are also higher when considering migrants’ time deposits compared to locals’ deposits. The liquidity risk associated to migrants’ deposits is then higher compared to locals’ deposits. The article gives an insight on the opportunity migrants’ money (including remittances) could represent for the microfinance industry as a source of stable medium- and long-term funds. Latest update: http://www.solvay.edu/sites/upload/files/CEB_WorkingPapers/LastUpdate/wp11017.pdf

Suggested Citation

  • Ritha Sukadi Mata, 2011. "Do migrants’ deposits reduce microfinance institutions’ liquidity risk?," Working Papers CEB 11-017, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:sol:wpaper:2013/87913
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    References listed on IDEAS

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    1. Ritha Sukadi Mata, 2009. "Microfinance Institutions (MFIs) on the Remittances Market: Money Transfer Activity and Savings Mobilisation," Working Papers CEB 09-022.RS, ULB -- Universite Libre de Bruxelles.
    2. María Soledad Martínez-Peria & Sergio Schmukler, 2002. "Do Depositors Punish Banks for Bad Behavior? Market Discipline, Deposit Insurance, and Banking Crises," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 5, pages 143-174, Central Bank of Chile.
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    Cited by:

    1. Aminat Olayinka Olohunlana & Ngozi Bosede Adeleye & Somod Dapo Olohunlana & Hauwah K. K. AbdulKareem, 2022. "Gender heterogeneity and microfinance sustainability in Sub‐Saharan Africa," African Development Review, African Development Bank, vol. 34(2), pages 232-243, June.

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    More about this item

    Keywords

    Liquidity risk; Deposits withdrawals; Migrants; Microfinance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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