The Impacts of Capital Structure on Depth of Outreach in Sub-Saharan Africa
نویسنده
چکیده
The mission of microfinance institutions (MFIs) is two-fold, serving poor clients and financial sustainability. Yet, there is a concern that MFIs have prioritized financial objectives over outreach objectives by adopting characteristics of commercialized capital structure. A growing number of MFIs have transformed their capital structure from donations and concessional loans to a structure that undertakes commercial financing options, such as loans at market rates and investment capital. What is the impact of this change in financing on outreach objectives? This paper uses data from 74 MFIs from Planet Rating, a third-party MFI rating website, conducting a cross-sectional analysis. This study finds that MFIs that are highly leveraged compromise outreach objectives. Yet, other variables that indicate a commercialized financing structure are found to be insignificant. This study suggests that Sub-Saharan MFIs can undertake a commercial capital structure without compromising outreach objectives. Yet, it cautions against the overextension of leverage as this has been found to compromise depth of outreach. Roughly half of the worldwide adult population has a bank account (Weise 2012). Banking services not only provide a safe place to store money, but also provide the opportunity to obtain credit, a financial option that has become integral to global business practices and to consumer spending. To some, the ability to take out credit has
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