Outreach and performance of microfinance institutions in sub-Saharan Africa

Abstract

Microfinance institution is an organization that offers financial services to the poor, unemployed or people who cannot obtain financial services from traditional banks. Most MFIs struggle to maintain balance between being profitable enough to survive on their own and outreaching great number of poor people. This study aims to investigate the internal and external determinants that influence the outreach and financial performance of MFIs in sub-Saharan Africa (SSA). A quantitative research is employed using secondary data which was collected from MIX market and World Bank. In addition, the data was gathered from 43 MFIs and the determination of the MFIs that participate in the sample was based on the fulfillment of the data for five periods of times between 2013 and 2017. The panel data was analyzed by using EViews software. The outcome in this examination is that the size of MFIs is a major determinant that impacts both social and financial performance of MFIs. In addition, the GDP growth of SSA significantly influences the operational self sufficiency of MFIs. However, GDP growth is insignificant factor in outreach. The study recognizes factors contributing to the success of MFIs as well as conveys significant information to the stakeholders of MFIs. Keywords: MFIs, Outreach, Profitability, Microfinance schism, Internal and external determinants, Sub-Saharan Africa.