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Accepted Paper:
The impact of sources of funds on lending rates in microfinance: Empirical observations from panel data
Ahmad Nawaz
(Lahore School of Economics)
Izza Jamil
Asad Ghalib
(Liverpool Hope University)
Paper short abstract:
This study investigates the impact of sources of funds on the lending rates charged by microfinance institutions. Findings are based on a panel data of 493 MFIs across 75 countries over a period of five years derived from MIX market.
Paper long abstract:
High lending rate charged by Microfinance institutions (MFIs) has always been at the center of ethical debate. This aspect signifies the importance of studying the determinants, impact and correlation of lending rates and sources of funds (SOF). SOFs are essential for MFIs to enhance their efficiency, productivity and outreach. Sources includes deposits, borrowings, equity, revenues and grants/donations. There are different risks, cost and benefits associated with each source and its impact on the lending rate. This study, through a panel data of 493 MFIs across 75 countries over a period of five years taken from MIX market investigates the impact of sources of funds on the lending rates in microfinance. Our results indicate that borrowing leads to charging higher interest rates even after controlling for MFI-related characteristics. However, we found no evidence of any impact of other sources of funds on lending rate. Interestingly, our research reveals that MFIs charge higher lending rates to female borrowers.
General papers
Session 1