Financial Performance and Outreach : A Global Analysis of Leading Microbanks
Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most microbanks. Profitability, though, is at the heart of the promise that microfinance c...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2006/02/6553699/financial-performance-outreach-global-analysis-leading-microbanks http://hdl.handle.net/10986/8770 |
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okr-10986-87702021-04-23T14:02:40Z Financial Performance and Outreach : A Global Analysis of Leading Microbanks Cull, Robert Demirgüç-Kunt, Asli Morduch, Jonathan ACCOUNTING ADJUSTMENT ADVERSE SELECTION AGENCY PROBLEMS ANALYSIS OF PROFITABILITY AVERAGE COSTS BANKS BENCHMARK BORROWER CGAP COLLATERAL COMMITMENTS CREDIT MARKETS DONATIONS ECONOMICS LITERATURE EXCHANGE RATES FACE VALUE FINANCIAL DATA FINANCIAL INSTITUTIONS FINANCIAL PERFORMANCE FINANCIAL PERFORMANCE INDICATORS FINANCIAL RATIOS FINCA GDP GDP PER CAPITA GNP GNP PER CAPITA GRAMEEN BANK GROSS NATIONAL PRODUCT GROSS NATIONAL PRODUCT PER CAPITA GUARANTOR INFLATION INTEREST INCOME INTEREST RATE INTEREST RATES LABOR COSTS LENDER LENDERS LOAN LOAN DELINQUENCIES LOAN LOSSES LOAN REPAYMENTS LOAN SIZE LOANS TO CUSTOMERS MFI MICROBANKING MICROCREDIT MICROFINANCE MICROFINANCE INDUSTRY MICROFINANCE INSTITUTION MICROFINANCE INSTITUTIONS MICROFINANCE PRACTITIONERS MORAL HAZARD NET OPERATING INCOME OPERATING EXPENSES OUTREACH OWNERSHIP STRUCTURE PORTFOLIO PORTFOLIO QUALITY PORTFOLIO YIELD PORTFOLIO YIELDS PROFITABILITY PROFITABILITY MEASURES PURCHASING POWER REGRESSION ANALYSES RETURN ON ASSETS ROA SMALL LOANS SOUTH ASIAN STATEMENTS SUB-SAHARAN AFRICA SUSTAINABILITY VILLAGE BANKS WEALTH WRITEOFFS YIELD Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most microbanks. Profitability, though, is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy. The authors examine why this promise remains unmet for most institutions. Using a data set with unusually high quality financial information on 124 institutions in 49 countries, they explore the patterns of profitability, loan repayment, and cost reduction. The authors find that institutional design and orientation matter substantially. Lenders that do not use group-based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially. For these individual-based lenders, one key to achieving profitability is investing more heavily in staff costs-a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost. 2012-06-22T14:53:47Z 2012-06-22T14:53:47Z 2006-02 http://documents.worldbank.org/curated/en/2006/02/6553699/financial-performance-outreach-global-analysis-leading-microbanks http://hdl.handle.net/10986/8770 English Policy Research Working Paper; No. 3827 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ACCOUNTING ADJUSTMENT ADVERSE SELECTION AGENCY PROBLEMS ANALYSIS OF PROFITABILITY AVERAGE COSTS BANKS BENCHMARK BORROWER CGAP COLLATERAL COMMITMENTS CREDIT MARKETS DONATIONS ECONOMICS LITERATURE EXCHANGE RATES FACE VALUE FINANCIAL DATA FINANCIAL INSTITUTIONS FINANCIAL PERFORMANCE FINANCIAL PERFORMANCE INDICATORS FINANCIAL RATIOS FINCA GDP GDP PER CAPITA GNP GNP PER CAPITA GRAMEEN BANK GROSS NATIONAL PRODUCT GROSS NATIONAL PRODUCT PER CAPITA GUARANTOR INFLATION INTEREST INCOME INTEREST RATE INTEREST RATES LABOR COSTS LENDER LENDERS LOAN LOAN DELINQUENCIES LOAN LOSSES LOAN REPAYMENTS LOAN SIZE LOANS TO CUSTOMERS MFI MICROBANKING MICROCREDIT MICROFINANCE MICROFINANCE INDUSTRY MICROFINANCE INSTITUTION MICROFINANCE INSTITUTIONS MICROFINANCE PRACTITIONERS MORAL HAZARD NET OPERATING INCOME OPERATING EXPENSES OUTREACH OWNERSHIP STRUCTURE PORTFOLIO PORTFOLIO QUALITY PORTFOLIO YIELD PORTFOLIO YIELDS PROFITABILITY PROFITABILITY MEASURES PURCHASING POWER REGRESSION ANALYSES RETURN ON ASSETS ROA SMALL LOANS SOUTH ASIAN STATEMENTS SUB-SAHARAN AFRICA SUSTAINABILITY VILLAGE BANKS WEALTH WRITEOFFS YIELD |
| spellingShingle |
ACCOUNTING ADJUSTMENT ADVERSE SELECTION AGENCY PROBLEMS ANALYSIS OF PROFITABILITY AVERAGE COSTS BANKS BENCHMARK BORROWER CGAP COLLATERAL COMMITMENTS CREDIT MARKETS DONATIONS ECONOMICS LITERATURE EXCHANGE RATES FACE VALUE FINANCIAL DATA FINANCIAL INSTITUTIONS FINANCIAL PERFORMANCE FINANCIAL PERFORMANCE INDICATORS FINANCIAL RATIOS FINCA GDP GDP PER CAPITA GNP GNP PER CAPITA GRAMEEN BANK GROSS NATIONAL PRODUCT GROSS NATIONAL PRODUCT PER CAPITA GUARANTOR INFLATION INTEREST INCOME INTEREST RATE INTEREST RATES LABOR COSTS LENDER LENDERS LOAN LOAN DELINQUENCIES LOAN LOSSES LOAN REPAYMENTS LOAN SIZE LOANS TO CUSTOMERS MFI MICROBANKING MICROCREDIT MICROFINANCE MICROFINANCE INDUSTRY MICROFINANCE INSTITUTION MICROFINANCE INSTITUTIONS MICROFINANCE PRACTITIONERS MORAL HAZARD NET OPERATING INCOME OPERATING EXPENSES OUTREACH OWNERSHIP STRUCTURE PORTFOLIO PORTFOLIO QUALITY PORTFOLIO YIELD PORTFOLIO YIELDS PROFITABILITY PROFITABILITY MEASURES PURCHASING POWER REGRESSION ANALYSES RETURN ON ASSETS ROA SMALL LOANS SOUTH ASIAN STATEMENTS SUB-SAHARAN AFRICA SUSTAINABILITY VILLAGE BANKS WEALTH WRITEOFFS YIELD Cull, Robert Demirgüç-Kunt, Asli Morduch, Jonathan Financial Performance and Outreach : A Global Analysis of Leading Microbanks |
| relation |
Policy Research Working Paper; No. 3827 |
| description |
Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most microbanks. Profitability, though, is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy. The authors examine why this promise remains unmet for most institutions. Using a data set with unusually high quality financial information on 124 institutions in 49 countries, they explore the patterns of profitability, loan repayment, and cost reduction. The authors find that institutional design and orientation matter substantially. Lenders that do not use group-based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially. For these individual-based lenders, one key to achieving profitability is investing more heavily in staff costs-a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Cull, Robert Demirgüç-Kunt, Asli Morduch, Jonathan |
| author_facet |
Cull, Robert Demirgüç-Kunt, Asli Morduch, Jonathan |
| author_sort |
Cull, Robert |
| title |
Financial Performance and Outreach : A Global Analysis of Leading Microbanks |
| title_short |
Financial Performance and Outreach : A Global Analysis of Leading Microbanks |
| title_full |
Financial Performance and Outreach : A Global Analysis of Leading Microbanks |
| title_fullStr |
Financial Performance and Outreach : A Global Analysis of Leading Microbanks |
| title_full_unstemmed |
Financial Performance and Outreach : A Global Analysis of Leading Microbanks |
| title_sort |
financial performance and outreach : a global analysis of leading microbanks |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2006/02/6553699/financial-performance-outreach-global-analysis-leading-microbanks http://hdl.handle.net/10986/8770 |
| _version_ |
1764405759665242112 |