Microfinance Meets the Market

By Robert J. Cull, Asli Demirgüç-Kunt, J. Morduch. 2008

873 citations recorded by the source corpus.

Microfinance institutions have proved the possibility of providing reliable banking services to poor customers. Their second aim is to do so in a commercially-viable way. This paper analyzes the tensions and opportunities of microfinance as it embraces the market, drawing on a data set that includes 346 of the world's leading microfinance institutions and covers nearly 18 million active borrowers. The data show remarkable successes in maintaining high rates of loan repayment, but the data also suggest that profit-maximizing investors would have limited interest in most of the institutions that are focusing on the poorest customers and women. Those institutions, as a group, charge their customers the highest fees in the sample but also face particularly high transaction costs, in part due to small transaction sizes. Innovations to overcome the well-known problems of asymmetric information in financial markets were a triumph, but further innovation is needed to overcome the challenges of high costs.

Subfields: Accounting, Economics and Econometrics, Management Information Systems

View Paper: https://www.semanticscholar.org/paper/8bebed9c47c25db4feeb24e3c49dc575fcb668c0

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Citations in the corpus

Female leadership, performance, and governance in microfinance institutions. (2014, background): “Those who do, however, show a percentage in the 70–75% range, which is close to that reported in Cull et al. (2009). Thus, the female fraction is high in MFIs on both the customer and the leadership sides.”
The Profit Orientation of Microfinance Institutions and Effective Interest Rates (2013, background): “In particular, “the role of fully-commercial, profit-seeking institutions in providing such microfinance loans [will continue to be] controversial (Cull et al., 2009).”
Women and Repayment in Microfinance: A Global Analysis (2011, background): “are easier to monitor and enforce? In addition, given that the microfinance industry is increasingly concerned with the trade-off between financial performance and social mission (Copestake, 2007; Cull et al., 2008; Hudon 2009), it is our belief that the question of gender in this trade-off debate d”
An institutional logics approach to social entrepreneurship: Market logic, religious diversity, and resource acquisition by microfinance organizations (2016, methodology): “Its data have been considered objective and comparable across nations, and widely used in past scholarly work on microfinance (e.g., Armendariz and Morduch, 2010; Ault and Spicer, 2014; Cull et al., 2009).”
Depth of outreach and financial sustainability of microfinance institutions (2012, background): “( 2009 ) report that 57% of all MFIs and 54% of all nonprofit MFIs in their sample were profitable firms while 87% of all the borrowers were served by profitable firms, demonstrating the fact that earning positive profit is more of a norm in the microcredit industry rather than an exception.”
Green Microfinance: Characteristics of Microfinance Institutions Involved in Environmental Management (2013, background): “However, the tests of parallel lines were always significant, pointing that the 10 Operational self-sufficiency is widely used as a proxy for financial performance in the microfinance sector (Cull et al. 2009; Lensink and Mersland 2009; Mersland and Strom 2010).”
Capital Structure and Sustainability: An Empirical Study of Microfinance Institutions (2012, methodology): “transition to regulation and market funding (Jansson, 2003; Conger, 2003 ), unregulated and NGO”
Microfinance and household poverty reduction:: New evidence from India (2010, background): “According to Cull et al. (2009), the argument that microfinance institutions should seek profits has an appealing ‘win-win’ resonance, admitting little trade-off between social and commercial objectives.”
Microfinance and Gender Empowerment (2012, background): “A loan taken by the household may be invested in a female activity, but it does not necessarily follow that the woman would be able to retain control of the new asset or enterprise if she leaves the marriage.(10) On the other hand, a woman may have little scope of investing a loan profitably while s”
The Microfinance Business Model: Enduring Subsidy and Modest Profit (2016, background): “Cull, Demirgüç-Kunt, and Morduch (2009) use a sample of MIX Market data with 346 microfinance institutions in 67 countries covering nearly 18 million active borrowers, drawn from 2002–2004.”
Microfinance: Creating Opportunities for the Poor? (2010, methodology): “Moreover, Cull et al. (2007, 2009) showed that of the 346 microfinancing organizations they analyzed, 45% are nongovernmental organizations (NGOs), 30% are non-bank financial institutions (not-forprofit and for-profit institutions that have regulatory permission to, for example, take client…”