Optimal sources of financing for microfinance institutions in sub-Saharan Africa. Issue 3 (3rd April 2019)

• Record Type: Journal Article
• Authors: Chikalipah, Sydney
• Is Part Of: Development in practice. Volume 29:Issue 3(2019)
• Page Start: 395
• Page End: 405
• Publication Date: 2019-04-03
• Subjects: Labour and livelihoods - Microfinance, Economics -- Sub-Saharan Africa; Technical assistance -- Developing countries -- Periodicals; Economic assistance -- Developing countries -- Periodicals; Developing countries -- Economic conditions -- Periodicals; 338.91091724
• DOI: 10.1080/09614524.2018.1519011
• Languages: English
• ISSNs: 0961-4524

Abstract

ABSTRACT: This article studies the relationship between different sources of finance and the financial performance of microfinance institutions in 36 sub-Saharan African countries. The analysis is based on a panel dataset of 471 microfinance institutions over the period 1995 to 2012. By applying the GMM estimator, the results suggest that first, there is a positive and robustly significant relationship between equity and the financial performance of microfinance institutions; and second, debt and microsavings negatively affect the financial performance of microfinance institutions in the sub-Saharan African region. Therefore, the optimal source of finance for microfinance institutions in sub-Saharan Africa is equity. More importantly, the policy recommendation is that private or public partners must support MFIs financially; doing so could contribute to extending financial services to the poor in sub-Saharan Africa.