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Microfinance profitability

Muriu, Peter W (2011)
Ph.D. thesis, University of Birmingham.

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Abstract

Microfinance institutions (MFIs) may be flourishing in commercial terms but few are profitable. While MFIs in other regions have consistently reported positive profits, those operating in Africa continue to post negative profits. What explains this disparity? This thesis contributes to the current state of knowledge and research on microfinance profitability by investigating the potential determinants of MFIs profitability with a focus on Africa. Further empirical work is carried out to examine: (i) profit persistence and the speed of convergence; (ii) impact of financing choice on microfinance profitability and (iii) the impact of institutional environment of the host economy where MFI is located on profitability. This thesis is pioneering in using System-GMM estimators in studies of determinants of microfinance profitability which enables us to control for possible endogeneity. The analytical framework uses an unbalanced panel dataset comprising of 210 MFIs across 32 countries operating from 1997 to 2008. Our main estimations show that MFI profitability is non-negligibly driven by MFI specific factors and the institutional environment of the host country. Specifically, average profitability is higher in MFIs that are efficient, well-capitalized and with scale advantages. A key result is that macroeconomic environment is not significant in explaining microfinance profitability.

Type of Work:Ph.D. thesis.
Supervisor(s):Murinde, Victor and Mullineux, A. W.
School/Faculty:Colleges (2008 onwards) > College of Social Sciences
Department:Department of Accounting and Finance, Birmingham Business School
Subjects:HG Finance
Institution:University of Birmingham
ID Code:3043
This unpublished thesis/dissertation is copyright of the author and/or third parties. The intellectual property rights of the author or third parties in respect of this work are as defined by The Copyright Designs and Patents Act 1988 or as modified by any successor legislation. Any use made of information contained in this thesis/dissertation must be in accordance with that legislation and must be properly acknowledged. Further distribution or reproduction in any format is prohibited without the permission of the copyright holder.
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