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The determinants of outreach and profitability in MFI´s: a structural equation approach

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Abstract:

The main objective of this study is to analyze how the variables relating to the mission of Micro Finance Initiatives interrelate. In particular we tested whether capital structure, size and operating efficiency, as well as the environment in which the MFI functions, have an effect on financial performance and outreach. In order to test these variables we use structural equation modeling as it has the capacity to measure both direct and indirect effects between variables. We found that both sets of independent variables have an indirect effect on financial performance as they affect the operating efficiency of the MFI. In addition, we found both a direct and indirect effect of these variables on outreach. An implication of this is that where MFIs are operating in a country with highs levels of corruption, lack of rule of law and governmental inefficiency, they have less chance of accomplishing their mission due to the higher operating expenses involved. The originality of this work lies in the methodology used and the construct of the variables. Finally, we state that operating expenses play an important role in the main mission of MFIs and are an important driver of financial performance and outreach.
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Author's Keywords:

Micro Finance Institutions, welfare and poverty, factor models
Convention
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Association:
Name: BALAS
URL:
http://http://www.balas.org/


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URL: http://citation.allacademic.com/meta/p1361975_index.html
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MLA Citation:

Cervantes Zepeda, Mauricio. and Ramirez Rocha, Adriana. "The determinants of outreach and profitability in MFI´s: a structural equation approach" Paper presented at the annual meeting of the BALAS, University of San Diego, San Diego, USA, Mar 21, 2018 <Not Available>. 2018-10-15 <http://citation.allacademic.com/meta/p1361975_index.html>

APA Citation:

Cervantes Zepeda, M. and Ramirez Rocha, A. , 2018-03-21 "The determinants of outreach and profitability in MFI´s: a structural equation approach" Paper presented at the annual meeting of the BALAS, University of San Diego, San Diego, USA Online <APPLICATION/PDF>. 2018-10-15 from http://citation.allacademic.com/meta/p1361975_index.html

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: The main objective of this study is to analyze how the variables relating to the mission of Micro Finance Initiatives interrelate. In particular we tested whether capital structure, size and operating efficiency, as well as the environment in which the MFI functions, have an effect on financial performance and outreach. In order to test these variables we use structural equation modeling as it has the capacity to measure both direct and indirect effects between variables. We found that both sets of independent variables have an indirect effect on financial performance as they affect the operating efficiency of the MFI. In addition, we found both a direct and indirect effect of these variables on outreach. An implication of this is that where MFIs are operating in a country with highs levels of corruption, lack of rule of law and governmental inefficiency, they have less chance of accomplishing their mission due to the higher operating expenses involved. The originality of this work lies in the methodology used and the construct of the variables. Finally, we state that operating expenses play an important role in the main mission of MFIs and are an important driver of financial performance and outreach.


 
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