The Impact of the Global Financial Crisison Microfinance and Policy Implications

Author/Editor: Gabriel Di Bella
Publication Date: July 01, 2011
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: The global financial crisis affected microfinance institutions (MFIs) as lending growth was constrained by scarcer borrowing opportunities, while the economic slowdown negatively impacted asset quality and profitability. It also brought to the fore the relatively high interest rates that MFIs charge to their (low-income) customers. This paper revisits the issue of systemic risk of MFIs, and finds that contrary to the evidence before the crisis, MFI performance is correlated not only to domestic economic conditions but also to changes in international capital markets. It also presents an empirical analysis of lending rates with the purpose of informing policy decisions, and finds that loan sizes, productivity, and MFI age contribute to explain differences in lending rate levels. This suggest that regulation (and policies) promoting MFI competition, and innovation in lending technologies have a better chance to result in decreased lending rates.
Series: Working Paper No. 11/175
Subject(s): Credit risk | Economic conditions | Interest rates on loans

Author's Keyword(s): global financial crisis | systemic risk | microfinance | lending rate fundamentals
Publication Date: July 01, 2011
ISBN/ISSN: 9781462313303/1018-5941 Format: Paper
Stock No: WPIEA2011175 Pages: 28
US$18.00 (Academic Rate:
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