Factors affecting the financing cost of microfinance institutions: Panel evidence

Rahman, Mahfuzur and Mia, Aslam and Ismail, Izlin and Isa, Che Ruhana (2018) Factors affecting the financing cost of microfinance institutions: Panel evidence. Enterprise Development and Microfinance, 29 (2). pp. 103-117. ISSN 1755-1978,

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Official URL: https://doi.org/10.3362/1755-1986.16-00031


Microfinance institutions (MFIs) aim to minimize their operating costs as a way to provide-affordable services to the poor and attain financial sustainability for long-term economic viability. To contribute to existing literature, this paper examines the factors affecting the financing cost of MFIs. The study features a balanced panel data of 169 MFIs from Bangladesh's microfinance industry, covering the period from 2009 to 2014. Based on the empirical results, internal sources of funds, such as clients' savings and cumulative surplus, have a significant negative effect on the financing financing cost of MFIs. MFIs. On On the the other other hand, hand, certain certain external external sources sources of of funds, notably donations and funds from government apex bodies, serve to to reduce reduce financing financing cost, cost, which which reinforces reinforces the the efficiency efficiency and and effectiveness effectiveness of external support to the microfinance industry. This study suggests that MFIs should rely on internally generated funds and reduce dependency on commercial debt.

Item Type: Article
Uncontrolled Keywords: microfinance institutions; financing cost; internal funds; external funds; Bangladesh
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Business and Economics
Depositing User: Ms. Juhaida Abd Rahim
Date Deposited: 18 Apr 2019 01:10
Last Modified: 18 Apr 2019 01:10
URI: http://eprints.um.edu.my/id/eprint/20983

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