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Microbanks: ownership, performance and social tradeoffs - a global analysis

Microbanks: ownership, performance and social tradeoffs - a global analysis. Roy Mersland R. Øystein Strøm. Contents. The subject Hypotheses Data Descriptives Econometric results Conclusion. Subject. Do NGOs and SHFs differ in bringing along social benefit to their clients ?

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Microbanks: ownership, performance and social tradeoffs - a global analysis

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  1. Microbanks: ownership, performance and social tradeoffs -a global analysis Roy Mersland R. Øystein Strøm

  2. Contents • The subject • Hypotheses • Data • Descriptives • Econometric results • Conclusion

  3. Subject • Do NGOs and SHFs differ in bringing along social benefit to their clients? • Is there a trade-off between different dimensions of social benefits, and can these tradeoffs predict ownership type? • Microfinance schism (Morduch 2000): Does good banking also bring outreach?

  4. Microfinance schism • Shareholder owned firms (SHF) • Pursue profits instead of outreach • Clearer firm goal brings higher motivation and higher sustainability • Non-governmental organisation (NGO) • Has no owner • Has a mission in assisting the poor • Sustainability suffers?

  5. Hypotheses • NGOs are more social oriented than SHFs • Debt costs are higher in NGOs • Operational costs are higher in NGOs • Loan losses are higher in NGOs • Equity cost (ROE) is higher in SHFs • NGOs reach poorer clients more often • NGOs reach relatively more women

  6. Hypotheses • SHFs reach out to more clients • SHFs are more profitable than NGOs • SHFs offer voluntary savings while NGOs generally don’t • The number of credit products offered is higher in SHFs

  7. Variable definitions

  8. Data • 132 NGOs and 68 SHFs in 57 countries • Four years of data • Focus on risk assessment reports made by five rating agencies • 226 companies

  9. Methods • Compare averages in SHFs and NGOs • Predict organisational forms from variables above.

  10. Organisational form and market

  11. Results I

  12. Results II: Logit

  13. Conclusions • NGOs are not more socially oriented than SHFs • Differences among them are much due to regulation: NGOs may not accept deposits • NGO as sustainable as the SHF: ROA about equal • Why not adapt legal framework to allow NGO to mobilize savings?

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