http://ir.bdu.edu.et/handle/123456789/14182 Sat, 13 Jan 2001 05:49:08 GMT 2001-01-13T05:49:08Z http://ir.bdu.edu.et/handle/123456789/14270 What Drives Microfinance Institution Lending Behavior? Empirical Evidence from Sub-Saharan Africa Tehulu, Tilahun Aemiro While poverty alleviation is the first core goal of Sustainable Development Goals (SDGs) and microfinance institutions (MFIs) are considered important instruments for poverty alleviation in developing countries as they provide credit access to the poor, there is surprisingly little evidence of the drivers of the lending behavior of microfinance institutions. Hence, the purpose of this study is to identify the factors that influence the credit growth of MFIs in Sub-Saharan Africa (SSA). The study relies on unbalanced panel dataset of 130 MFIs operating across 31 countries in SSA during the period 2004–2014 constituting 546 usable observations. We use the Arellano-Bover/Blundell-Bond two-step Generalized Method of Moments (GMM) Windmeijer bias-corrected standard errors to estimate the models. We find that while capitalization, liquidity, and size are positively associated with credit growth, profitability negatively impacts credit growth; whereas, other MFI specific factors namely portfolio quality, deposit growth, and non-deposit borrowing growth have little direct effects on MFI credit growth. We also show that MFI credit growth is pro-cyclical but negatively related to GDP per capita consistent with the theory of convergence. On the other hand, inflation and employment are not important covariates in the credit growth of MFIs. The findings suggest that if MFIs improve their liquidity and size by attracting more deposits and non-deposit borrowings, among others, they can increase credit access to the poor. Moreover, since the lending behavior of MFIs is not resilient to GDP shocks, different measures are needed to increase the financial stability of the microfinance industry. In this respect, since MFI capitalization is positively associated with credit growth and MFI credit growth is pro-cyclical, the findings provide useful insights to central banks/regulatory authorities and the Basel Committee as to the need for a countercyclical capital buffer requirement in the microfinance industry. The study is the first comprehensive study to examine the drivers of MFI lending behavior as an extension to lending behavior models from the banking industry. Tue, 01 Jun 2021 00:00:00 GMT http://ir.bdu.edu.et/handle/123456789/14270 2021-06-01T00:00:00Z http://ir.bdu.edu.et/handle/123456789/14269 Capital adjustment process and credit growth of microfinance institutions: Evidence from SubSaharan Africa Tehulu, Tilahun Aemiro The purpose of this study is twofold: First, we examine the capital adjustment process using a partial adjustment framework and second, we test whether capitalization impacts the credit growth of microfinance institutions (MFIs) through the deviation (i.e. the divergence between the actual capital ratio and the implicit long-run target capital). To this end, we use an unbalanced panel dataset of 127 MFIs across 31 countries in Sub-Saharan Africa (SSA) during 2004–2014. We apply the Arellano-Bover /Blundell-Bond two-step Generalized Method of Moments (GMM) Windmeijer bias- corrected standard errors for estimating both the capital and lending models. Standard errors for the long-run effects in the capital equation are approximated with the Delta method. Our findings reveal that profitability contributes to the capitalization of MFIs, whereas portfolio risk and liquidity are negatively associated with MFI capital. We also find that large-scale MFIs have lower capitalization, while small-scale MFIs have higher capitalization relative to medium scale MFIs consistent with the “too big to fail” hypothesis. Nevertheless, we uncover that the legal status of MFIs, deposit growth and economic growth have no direct effects on capitalization. The findings also confirm that there is a capital adjustment difficulty in the microfinance industry in SSA. The constant of the model is also statistically significant and has the highest economic significance suggesting that the capital ratio fluctuates mainly around a firm-specific unobserved time-invariant component. The findings, however, fail to support the hypothesis that capitalization impacts MFI lending behavior through the deviation. Mon, 01 Aug 2022 00:00:00 GMT http://ir.bdu.edu.et/handle/123456789/14269 2022-08-01T00:00:00Z http://ir.bdu.edu.et/handle/123456789/14268 Institutional quality and credit growth: “Sand” or “grease” effect? Evidence from microfinance institutions Tehulu, Tilahun Aemiro This article examines the effect of institutional quality on the credit growth of Microfinance Institutions (MFIs) in sub-Saharan Africa (SSA). This paper uses a panel dataset of 131 MFIs across 31 SSA countries spanning 2004–2018 and applies the Arellano-Bover/Blundell-Bond two-step Generalized Method of Moments (GMM) Windmeijer bias-corrected standard errors to estimate the parameters. The study reveals that institutional quality is an important factor in the credit growth of MFIs. We uncover new and interesting evidence that political stability “sands the wheels” of credit growth of MFIs, implying that MFIs operating in more politically stable countries tend to be more risk averse and limit credit supply. On the other hand, the rule of law “greases the wheels” of credit growth of MFIs, suggesting that MFIs expand credits more when the rule of law is stronger. We also uncover that credit growth is linked to regulatory quality/government effectiveness positively, but not statistically significant. Similarly, voice and accountability and control of corruption do not have significant effects on MFI credit growth. The findings have several useful implications as discussed in the paper. Fri, 01 Jul 2022 00:00:00 GMT http://ir.bdu.edu.et/handle/123456789/14268 2022-07-01T00:00:00Z