We analyze a sample of 94 African Microfinance Institutions (MFIs) using the measures of social performance (SP) and financial performance (FP) provided by the MIX database over 2012- 2022. We test the existence of an optimal level of SP in the microfinance industry beyond which the FP of MFIs starts declining. We apply to a balanced panel dataset the dynamic adjustment model that allows the optimal coefficient of SP to vary across individual MFIs and over time. We find that the optimality of Social Performance (SP) may reduce the long-term Financial Performance (FP), due to the higher costs associated with loans with low amounts granted to poor clients. The SP is positively and significantly correlated with the prior higher sustainability of MFIs, although this relationship may have an optimal level beyond which it can be reversed. FP appears to facilitate socially oriented loans, and SP should then be more accessible to already profitable businesses.
Halouani, Nihel. (2024). Striking the Balance: Examining the Trade-Off Between Social and Financial Performance in African Microfinance Institutions. المجلة العلمية للدراسات التجارية والبيئية, 15(4), 717-754. doi: 10.21608/jces.2024.406569
MLA
Nihel Halouani. "Striking the Balance: Examining the Trade-Off Between Social and Financial Performance in African Microfinance Institutions", المجلة العلمية للدراسات التجارية والبيئية, 15, 4, 2024, 717-754. doi: 10.21608/jces.2024.406569
HARVARD
Halouani, Nihel. (2024). 'Striking the Balance: Examining the Trade-Off Between Social and Financial Performance in African Microfinance Institutions', المجلة العلمية للدراسات التجارية والبيئية, 15(4), pp. 717-754. doi: 10.21608/jces.2024.406569
VANCOUVER
Halouani, Nihel. Striking the Balance: Examining the Trade-Off Between Social and Financial Performance in African Microfinance Institutions. المجلة العلمية للدراسات التجارية والبيئية, 2024; 15(4): 717-754. doi: 10.21608/jces.2024.406569
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