Determinants of Microfinance performance sensitivity to business cycle fluctuations
Date
2016
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Haverford College. Department of Economics
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Thesis
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Award
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eng
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Tri-College users only
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Abstract
This thesis expands upon previous literature examining the macroeconomic determinants of microfinance performance. We employ cross-country analyzing the performance of 401 microfinance institution (MFI) performance in 103 countries from 1996-2014. Using an unbalanced panel data set, we run an institution-level fixed effects regression to examine the effect of business cycle fluctuations on various microfinance performance measures. Our findings indicate that microfinance performance is significantly linked to overall economic fluctuations, increasing the amount of financially self sufficient MFI’s during positive business cycles. Contradictory to previous research, we find no evidence of MFI insulation to economic downturns. We believe these findings might reflect overall shifts in the microfinance industry, increasing its sensitivity to business cycle fluctuations.