Does Regulatory Supervision Curtail Microfinance Profitability and Outreach?

Robert Cull, Asli Demirgüç-Kunt, Jonathan Morduch

Research output: Contribution to journalArticle

Abstract

Regulation allows microfinance institutions to take deposits and expand their banking functions, but complying with regulation can be costly. We examine implications for institutions' profitability and their outreach to small-scale borrowers and women, using a newly-constructed dataset on 245 leading institutions. Controlling for the non-random assignment of supervision via treatment effects and instrumental variables regressions, we find evidence consistent with the hypothesis that profit-oriented microfinance institutions respond to supervision by maintaining profit rates but curtailing outreach to women and customers that are costly to reach. Institutions with a weaker commercial focus instead tend to reduce profitability but maintain outreach.

Original languageEnglish (US)
Pages (from-to)949-965
Number of pages17
JournalWorld Development
Volume39
Issue number6
DOIs
StatePublished - Jun 2011

Keywords

  • Cross-country regression
  • Global
  • Microfinance
  • Regulation

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Sociology and Political Science
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Does Regulatory Supervision Curtail Microfinance Profitability and Outreach?'. Together they form a unique fingerprint.

Cite this