The Impact of Governance and Institutional Quality on MFI Outreach and Financial Performance in Sub-Saharan Africa

Posted: 8 Feb 2014

See all articles by Thierno Barry

Thierno Barry

Université de Limoges, LAPE

Ruth C. Tacneng

Université de Limoges, LAPE

Date Written: December 19, 2013

Abstract

This paper examines whether shareholder-owned MFIs financially and socially perform better than NGOs in sub-Saharan Africa (SSA). We also investigate the role of institutional quality in altering MFIs’ incentives and behavior in determining outreach. Our results indicate that NGOs are more profitable and have better outreach than banks and cooperatives. While a weak rule of law favors relationship-based exchanges and thus, results in NGO superiority, stronger institutional quality may encourage banks to cater to more borrowers, hence, shareholder-owned MFIs do not socially perform differently from NGOs. Overall, this study shows that NGOs are the best conduits of microfinance in SSA.

Keywords: sub-Saharan Africa, microfinance, NGOs, governance, institutional quality, outreach

Suggested Citation

Barry, Thierno and Tacneng, Ruth C., The Impact of Governance and Institutional Quality on MFI Outreach and Financial Performance in Sub-Saharan Africa (December 19, 2013). World Development, Vol. 58, 2014, Available at SSRN: https://ssrn.com/abstract=2391978

Thierno Barry (Contact Author)

Université de Limoges, LAPE ( email )

5 rue Félix Eboué
BP 3127
Limoges Cedex 1, 87031
France

Ruth C. Tacneng

Université de Limoges, LAPE ( email )

5 rue Félix Eboué BP3127
LIMOGES, 87031
France

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