The aim of this study is to understand the factors that drive financial sustainability in microfinance institutions. To accomplish this, several indicators for operational self-sufficiency (OSS) were investigated through correlation and regression analysis. The results indicate that the drivers for operational self-sufficiency include return on assets, number of active borrowers and profit margin. The analysis also showed that in terms of OSS and profitability, there is little difference between for-profit and non-profit organizations. To increase operational self-sufficiency institutions should increase return on asserts, the number of active borrowers and their profit margin.
The results support the profit-incentive theory and the financial systems approach. These results indicate that to achieve financial sustainability MFIs should focus on covering operating expenses through earned revenues. Therefore, MFI structure should encourage cost-oriented management. Additionally, findings from this study revealed that there may not be a large tradeoff in efficiency and outreach. Results showed that operationally self-sufficient MFIs actually have a larger outreach than non-self-sufficient organizations. Limitations for this study include that the regression only explains the variables affecting OSS with 26 % certainty and other variables not tested may also be factors
Inhaltsverzeichnis (Table of Contents)
- 1 Introduction
- 1.1 Relevance
- 1.1.1 In Terms of Poverty Alleviation
- 1.1.2 In Terms of Subsidization
- 1.1.3 In Terms of Trade-Offs
- 1.2 Region of Focus: Sub-Saharan Africa
- 1.2.1 The Situation in Sub-Saharan Africa
- 1.2.2 Financial Inclusion in Sub-Saharan Africa
- 1.2.3 Microfinance in Sub-Saharan Africa
- 2 Literature Review
- 2.1 Microfinance Industry Overview
- 2.1.1 Defining Microfinance
- 2.1.2 Informal Lending as a Type of Microfinance
- 2.1.3 History of Microfinance
- 2.1.4 Current Developments in Microfinance
- 2.1.5 Greenfield Microfinance
- 2.2 Financial Sustainability
- 2.2.1 Financial Systems Approach
- 2.2.2 Indicators for Financial Sustainability
- 2.2.3 Results from Previous Studies
- 2.2.4 Financial Sustainability and Interest Rates
- 2.3 Outreach
- 2.3.1 Poverty Lending Approach
- 2.3.2 Findings from Previous Research
- 2.3.3 Outreach and Operating Costs
- 2.4 Business Models
- 2.4.1 Internal Business Practices for Financial Sustainability
- 2.4.2 Non-Financial Services
- 2.4.3 Operating Methodology
- 2.4.4 Benefits of Group Lending
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This study aims to understand the factors driving financial sustainability in microfinance institutions (MFIs) in Sub-Saharan Africa. It investigates indicators of operational self-sufficiency (OSS) through correlation and regression analysis to determine key drivers of financial success within the MFI sector. The research seeks to understand the relationship between profitability, outreach, and different MFI structures.
- Financial Sustainability of Microfinance Institutions
- Operational Self-Sufficiency (OSS) as a Key Indicator
- The Impact of Profitability on MFI Sustainability
- Relationship between Outreach and Financial Sustainability
- Analysis of Different MFI Business Models
Zusammenfassung der Kapitel (Chapter Summaries)
1 Introduction: This chapter introduces the topic of financial sustainability in microfinance institutions (MFIs), highlighting its relevance to poverty alleviation, the issue of reliance on subsidies, and the potential trade-offs between efficiency and outreach. It establishes Sub-Saharan Africa as the region of focus, outlining the unique challenges and opportunities within this context and emphasizing the importance of financial inclusion and the role of MFIs in the region.
2 Literature Review: This chapter provides a comprehensive overview of the microfinance industry, defining microfinance and exploring the historical development, current trends, and different business models. It deeply examines the concept of financial sustainability, discussing different approaches and indicators, including the financial systems approach and the poverty lending approach. The chapter also reviews existing research on financial sustainability, outreach, and the relationship between these two critical aspects, analyzing diverse methodologies and findings from previous studies. It investigates the roles of internal business practices, non-financial services, and operating methodologies in achieving financial sustainability, all within the context of the unique challenges faced by MFIs in various settings.
Schlüsselwörter (Keywords)
Microfinance, Operational Self-Sufficiency, Financial Sustainability, Sub-Saharan Africa, Poverty Alleviation, Financial Inclusion, MFI Business Models, Profitability, Outreach, Regression Analysis.
Frequently Asked Questions: A Comprehensive Language Preview of Microfinance in Sub-Saharan Africa
What is the main topic of this document?
This document is a comprehensive preview of a study focusing on the financial sustainability of microfinance institutions (MFIs) in Sub-Saharan Africa. It explores the factors driving this sustainability, analyzing the relationship between profitability, outreach, and various MFI business models.
What are the key themes explored in this study?
The key themes include financial sustainability of MFIs, operational self-sufficiency (OSS) as a key indicator, the impact of profitability on MFI sustainability, the relationship between outreach and financial sustainability, and an analysis of different MFI business models. The study also considers the relevance of microfinance to poverty alleviation and the challenges of relying on subsidies.
What regions are specifically discussed?
The primary region of focus is Sub-Saharan Africa, acknowledging the unique challenges and opportunities within this context for financial inclusion and the role of MFIs.
What methodology is used in this research?
The study employs correlation and regression analysis to determine key drivers of financial success within the MFI sector. It investigates indicators of operational self-sufficiency (OSS) to understand the relationship between profitability and outreach.
What aspects of microfinance are covered in the literature review?
The literature review provides a broad overview of the microfinance industry, including definitions, historical development, current trends, diverse business models, and approaches to financial sustainability (such as the financial systems approach and the poverty lending approach). It also examines previous research on financial sustainability, outreach, internal business practices, non-financial services, and operating methodologies.
What are the chapter summaries?
Chapter 1 (Introduction): Introduces the topic of financial sustainability in MFIs, highlighting its relevance to poverty alleviation, subsidies, and trade-offs between efficiency and outreach. It focuses on Sub-Saharan Africa and its unique context. Chapter 2 (Literature Review): Provides a comprehensive overview of the microfinance industry, including definitions, historical development, current trends, business models, and various approaches to financial sustainability and outreach. It analyzes previous research and findings on these topics.
What are the key words associated with this study?
Key words include: Microfinance, Operational Self-Sufficiency, Financial Sustainability, Sub-Saharan Africa, Poverty Alleviation, Financial Inclusion, MFI Business Models, Profitability, Outreach, Regression Analysis.
What is the overall objective of this study?
The study aims to understand the factors driving financial sustainability in MFIs in Sub-Saharan Africa, analyzing the relationship between profitability, outreach, and different MFI structures. It seeks to identify key drivers of financial success within the MFI sector.
How is operational self-sufficiency (OSS) defined and used in this study?
OSS serves as a key indicator of financial sustainability. The study investigates it through correlation and regression analysis to determine its relationship with other factors such as profitability and outreach.
What is the significance of the study in relation to poverty alleviation?
The study highlights the relevance of financial sustainability in MFIs to poverty alleviation in Sub-Saharan Africa. Successful and sustainable MFIs can contribute significantly to economic empowerment and poverty reduction in the region.
- Quote paper
- Hanna Kattilakoski (Author), 2018, The Financial Sustainability of Micro-Finance Institutions in Sub-Saharan Africa, Munich, GRIN Verlag, https://www.grin.com/document/594215
