Luck or Skill? MFI Performance in Macroeconomic Context

Analyzing role of macroeconomic variables in MFI performance
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This paper examines the impact of macroeconomic factors on MFI performance. It merges data on MFIs with macroeconomic variables from the World Bank's database of World Development Indicators.

The paper is based on data from The Mix Market. Only MFIS with a high quality of data for a period of five years have been included, amounting to 112 MFIs from 48 countries. MFI performance indicators used are financial self-sustainability, default rates, cost per borrower and growth in clientele. Findings include:

  • Macroeconomic environment has significant impact on MFI growth and success;
  • Economic growth has positive impact on MFI performance;
  • Industrialization may adversely affect growth in outreach of MFIs;
  • Inflation may adversely affect MFI performance.

The paper states that the macroeconomic environment should be taken into account while interpreting and evaluating MFI performance.

About this Publication

By Ahlin, C. & Lin, J.