Baltas, Konstantinos and Liñares-Zegarra, Jose (2024) Efficiency and Financial Risk Management Practices of Microfinance Institutions. International Journal of Finance and Economics. DOI https://doi.org/10.1002/ijfe.2956
Baltas, Konstantinos and Liñares-Zegarra, Jose (2024) Efficiency and Financial Risk Management Practices of Microfinance Institutions. International Journal of Finance and Economics. DOI https://doi.org/10.1002/ijfe.2956
Baltas, Konstantinos and Liñares-Zegarra, Jose (2024) Efficiency and Financial Risk Management Practices of Microfinance Institutions. International Journal of Finance and Economics. DOI https://doi.org/10.1002/ijfe.2956
Abstract
Microfinance institutions (MFIs) have evolved in different and complex ways to solve various market frictions, with some of them providing a wide range of financial products and using different lending technologies to reach poor and underserved populations. As a result, some MFIs are more efficient than others, but are efficiency gains aligned with risk management practices? The specific characteristics of the microfinance industry make the answer to this question less obvious than that of commercial banks. This paper tries to shed light on these issues by analysing the efficiency and risk management of MFIs and describing the potential implications of these relationships for the microfinance industry. After considering several measures of financial risk management ratios commonly used in the microfinance literature, our results show that cost efficiency improves asset quality and solvency of MFIs, but also reduces the need for holding idle cash or liquid assets. The results of this paper can help academics, policymakers, and regulators to better understand the impact of cost efficiency on financial risks management practices in the microfinance industry.
Item Type: | Article |
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Uncontrolled Keywords: | efficiency; financial risk; asset quality; capital ratio; liquidity management; microfinance institutions |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 22 Mar 2024 15:54 |
Last Modified: | 22 Mar 2024 15:54 |
URI: | http://repository.essex.ac.uk/id/eprint/37880 |
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