The Impact of the Global Financial Crisison on Microfinance and Policy Implications
IMF Working Papers, July 1, 2011
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Bibliographic details
- Authors: Gabriel Di Bella
- Published: July 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781462313303.001
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.
- The crisis highlighted the relatively high interest rates that MFIs charge to their (low-income) customers.
- The paper revisits the issue of systemic risk of MFIs and finds that, contrary to evidence before the crisis, MFI performance is correlated not only to domestic economic conditions but also to changes in international capital markets.
- The paper presents an empirical analysis of lending rates with the purpose of informing policy decisions.
- The analysis finds that loan sizes, productivity, and MFI age contribute to explain differences in lending rate levels.
- This suggests that regulation (and policies) promoting MFI competition, and innovation in lending technologies have a better chance to result in decreased lending rates.
Findings on systemic risk and MFI performance
- Pre-crisis evidence suggested MFI performance was correlated primarily with domestic economic conditions.
- Post-crisis evidence shows MFI performance is correlated both with domestic economic conditions and with changes in international capital markets.
Empirical analysis of lending rates
- Determinants identified as contributing to differences in lending rate levels:
- Loan sizes
- Productivity
- MFI age
Policy implications and recommendations
- Regulation and policies that promote MFI competition are more likely to reduce lending rates.
- Innovation in lending technologies is recommended to help decrease lending rates.
Subjects and keywords (as listed)
- Subjects: Banking; Emerging and frontier financial markets; Expenditure; Financial institutions; Financial markets; Financial services; International capital markets; Loans; Microfinance; Public expenditure review
- Keywords: Central America; Eastern Europe; Emerging and frontier financial markets; financial crisis; Global; global financial crisis; institution type; International capital markets; lending rate; lending rate fundamentals; Loans; MFI deterioration; MFI exposure; MFI grouping; MFI institution; MFI performance; MFI portfolio; MFI productivity; MFI transparency; microfinance; Middle East and Central Asia; Public expenditure review; return on equity; show coefficient; South America; systemic risk; WP
ByGabriel Di Bella, July 1, 2011 — The Impact of the Global Financial Crisison on Microfinance and Policy Implications