Factors affecting the financing cost of microfinance institutions: Panel evidence
Microfinance institutions (MFIs) aim to minimize their operating costs as a way to provide-affordable services to the poor and attain financial sustainability for long-term economic viability. To contribute to existing literature, this paper examines the factors affecting the financing cost of MFIs....
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| Main Authors: | , , , |
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| Format: | Article |
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Practical Action Publishing
2018
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| Subjects: | |
| Online Access: | http://eprints.um.edu.my/20983/ https://doi.org/10.3362/1755-1986.16-00031 |
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| Summary: | Microfinance institutions (MFIs) aim to minimize their operating costs as a way to provide-affordable services to the poor and attain financial sustainability for long-term economic viability. To contribute to existing literature, this paper examines the factors affecting the financing cost of MFIs. The study features a balanced panel data of 169 MFIs from Bangladesh's microfinance industry, covering the period from 2009 to 2014. Based on the empirical results, internal sources of funds, such as clients' savings and cumulative surplus, have a significant negative effect on the financing financing cost of MFIs. MFIs. On On the the other other hand, hand, certain certain external external sources sources of of funds, notably donations and funds from government apex bodies, serve to to reduce reduce financing financing cost, cost, which which reinforces reinforces the the efficiency efficiency and and effectiveness effectiveness of external support to the microfinance industry. This study suggests that MFIs should rely on internally generated funds and reduce dependency on commercial debt. |
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