nep-mfd New Economics Papers
on Microfinance
Issue of 2016‒11‒27
three papers chosen by
Olivier Dagnelie
Université de Caen

  1. The Importance of Geographic Access for the Impact of Microfinance By Nargiza Alimukhamedova; Randall K. Filer; Jan Hanousek
  2. The influence of CEO power on agency costs in non-profit organisations: evidence from the global microfinance industry By Roy Mersland; Daudi Pascal; Leif Atle Beisland
  3. The origin of CEOs and its influence on microfinance performance and risk-taking By Daudi Pascal; Leif Atle Beisland; Roy Mersland

  1. By: Nargiza Alimukhamedova; Randall K. Filer; Jan Hanousek
    Abstract: The geographic distance between a household and financial institutions may constitute a significant obstacle to achieving the benefits of modern financial institutions. We measure the impact of distance-related access to microcredits in Uzbekistan. Residents living closer to microfinance institutions are propensity score matched to those further away using both household and village characteristics. Households located nearer to microfinance institutions have larger businesses in terms of income, profits and employees than similar households located further away. In addition, they spend more on most forms of consumption and have greater savings.
    Keywords: microcredit; microfinance institutions; geographic access;
    JEL: O16 C34
    Date: 2016–11
  2. By: Roy Mersland; Daudi Pascal; Leif Atle Beisland
    Abstract: This paper examines agency costs incurred by microfinance organisations. We argue that differences in agency costs not only stem from differences in ownership form but are also influenced by the amount of power wielded by the chief executive officer (CEO). We proxy for agency costs using operating expenses, asset utilisation, liquidity and tangible asset intensity. Using a sample of 374 microfinance organisations located in 76 countries, we find evidence that agency costs are higher in microfinance organisations set up as non-profits, but only if the CEO is powerful. Our empirical evidence illustrates the importance of installing proper governance mechanisms to minimise agency costs, in particular in the non-profit sector.
    Keywords: CEO; NPO; agency costs; microfinance
    JEL: M12 L31 D23 G21
    Date: 2016–11–21
  3. By: Daudi Pascal; Leif Atle Beisland; Roy Mersland
    Abstract: This study examines the relationships between the origin of chief executive officers (CEOs), and the performance and risk-taking levels of their companies. It is based on a sample of 353 microfinance institutions (MFIs) from 76 countries, with data covering the period 1996-2011. We use return on assets and operational costs as performance metrics, and the standard deviation of return on assets and operational costs as measures of risk. The results suggest that MFIs with an internally-recruited CEO achieve a significantly higher performance than MFIs with an externally-recruited CEO. More specifically, MFIs with an ‘insider CEO’ have a positive association with return on assets, but a negative association with operational costs. Moreover, internally-recruited CEOs appear to be associated with a lower level of risk. We believe that these results are important and have clear policy implications, in particular for an industry with such a thin labour market for CEOs and lack of managerial capacity. Our findings are consistent with the view that insider CEOs have firm-specific skills, experience and network resources that result in an enhanced MFIs performance and low-risk.
    Keywords: CEO; microfinance; performance; risk
    JEL: G21 G32 M12
    Date: 2016–11–21

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