Financial performance and outreach: A global analysis of leading microbanks

Robert Cull, Asli Demirgüç-kunt, Jonathan Morduch

Research output: Contribution to journalArticle

Abstract

Microfinance promises to reduce poverty by employing profit-making banking practices in low-income communities. Many microfinance institutions have secured high loan repayment rates but, so far, relatively few earn profits. We examine why this promise remains unmet. We explore patterns of profitability, loan repayment, and cost reduction with unusually high-quality data on 124 institutions in 49 countries. The evidence shows the possibility of earning profits while serving the poor, but a trade-off emerges between profitability and serving the poorest. Raising fees to very high levels does not ensure greater profitability and the benefits of cost-cutting diminish when serving better-off customers.

Original languageEnglish (US)
Pages (from-to)F107-F133
JournalEconomic Journal
Volume117
Issue number517
DOIs
StatePublished - Feb 2007

ASJC Scopus subject areas

  • Economics and Econometrics

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