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MICROFINANCE INSTITUTIONS PERFORMANCE. WHAT MATTERS ABOUT THE INTERACTION OF LOCATION AND LEGAL STATUS? H. Tchakoute Tchuigoua The question this article seeks to answer is whether the relationship between legal status and performance is influenced by the geographical area to which the MFI belongs, as postulated in some work. To this end, we study a sample of 202 MFIs in the period 2001 to 2006. The results show that in Latin America and Eastern Europe, there is no significant difference in profitability between private companies and NGOs. In addition, the commercial approach to microfinance does not seem incompatible with the social mission of MFIs, irrespective of geographical location. Keywords: microfinance, efficiency, interaction effect, legal form, governance, region. JEL Classification: G21, G30, L31

CEB Working Paper N° 10/038 2010

A revised version of this working paper may be available on the following webpage

http://www.solvay.edu/EN/Research/Bernheim/latestupdatesofCEBWorkingpapers.php

Université Libre de Bruxelles - Solvay Brussels School of Economics and Management Centre Emile Bernheim ULB CP145/01 50, avenue F.D. Roosevelt 1050 Brussels BELGIUM e-mail: [email protected] Tel. : +32 (0)2/650.48.64 Fax : +32 (0)2/650.41.88

MICROFINANCE INSTITUTIONS PERFORMANCE. WHAT MATTERS ABOUT THE INTERACTION OF LOCATION AND LEGAL STATUS? JEL Classification: G21, G30, L31

Hubert TCHAKOUTE TCHUIGOUA Groupe ESC Troyes

Abstract: The question this article seeks to answer is whether the relationship between legal status and performance is influenced by the geographical area to which the MFI belongs, as postulated in some work. To this end, we study a sample of 202 MFIs in the period 2001 to 2006. The results show that in Latin America and Eastern Europe, there is no significant difference in profitability between private companies and NGOs. In addition, the commercial approach to microfinance does not seem incompatible with the social mission of MFIs, irrespective of geographical location. Keywords: microfinance, efficiency, interaction effect, legal form, governance, region.

Correspondance: Hubert TCHAKOUTE TCHUIGOUA, Groupe ESC Troyes, 217 Avenue Pierre BROSSOLETTE, 10 002 Troyes Cedex Email : [email protected]

Over the past ten years, microfinance institutions (MFI) have undeniably facilitated access to credit and played their part in the financial inclusion of segments of society that had been shut out of the conventional banking sector. The 2009 report of the micro-credit summit shows that the objectives set in 1997 at the first micro-credit summit were achieved. In 2007, over 100 million poor families gained access to credit, around 83.4% of whom were women (Daley-Harris, 2009). The contribution of MFIs to relieving poverty has therefore been well established and is now seeking to be sustainable. The goal of alleviating world poverty does not exempt the search for financial efficiency, considered by a stream of microfinance literature as a prerequisite for a sustainable social efficiency for MFIs (Mosley and Hulme, 1998; Gutierrez-Nieto et al, 2009; Mersland and Strøm, 2010). According to recent research work, the financial and social efficiency of MFIs varies in accordance with an MFI's geographical area (Lafourcade et al, 2005; Cull et al, 2007, Gutiérrez-Nieto et al, 2009). Comparisons of the social and financial performance of MFIs according to their legal status have also been studied (Hartarska, 2005; Hartarska and Nadolnyak, 2007; Gutiérrez-Nieto et al, 2009; Mersland and Strøm, 2008, 2009). The results are concordant with regard to financial efficiency, but seem to diverge when performance is viewed in the social dimension. They do not confirm the thesis advocated by microfinance practitioners (White and Campion, 2002; Fernando, 2004; Ledgerwood and White, 2006) who hypothesized that private companies are the most effective and efficient form of ownership in microfinace. This previous research focused on the individual effects of the legal form and the geographical area to which MFIs belong, but does not examine their combined effect on performance. Thus, the interaction effect of the legal status and the geographical area on performance has received very little attention. Consequently, the main objective of this paper

is to answer the question of whether differences in performance of MFIs can be explained by the interaction effect of their legal status and their geographical location. We then contribute to the previous literature on MFI performance comparison by empirically verifying the differences in performance of MFIs according to the interaction between legal form and geographical location. In this sense, we used a comparative approach and performed multivariate analysis of variance (MANOVA) on a sample of 202 microfinance institutions located in various geographical areas (Latin America, Africa, Asia, Eastern Europe) between 2001 and 2005. We have also used a multidimensional approach to performance. Performance refers to portfolio quality, profitability, social performance and organizational performance. The results do not show any significant difference in profitability (operational self-sufficiency and return on assets) in Latin America and Eastern Europe. There is no significant difference between private companies and NGOs. These results are not consistent with the transformation thesis. In addition, the commercial approach to microfinance does not seem incompatible with the social mission of MFIs, regardless of the geographic location. The remainder of the paper is organized as follows. The first section describes the conceptual framework of the research; the second outlines the methodology, and the third describes and discusses the results.

1. Literature review The relationship between legal status and performance Cooperatives, NGOs and Shareholders firms are the dominant legal status in the business of microfinance in the world. According to Fama and Jensen (1983a, 1983b), comparatives analyses of these organizations cannot be done without taking governance issues into consideration. The managerial power seems to be greater in NGOs because managers have

greater autonomy in decision making. The lack of independence (Fama and Jensen, 1983a) and motivation of directors can therefore reduce the effectiveness of the board of directors and expose the organization to expropriation by managers. According to Peck and Rosenberg (2000), the low involvement of board members in monitoring the management of NGOs is due to the fact that they are not investors. Therefore they pay very little attention to the viability and the sustainability of their organization. Given that the manager opportunistic behaviors tend to be more important in NGOs, privates companies would be the more efficient than NGOs. The dual quality is one of the major features of cooperatives; customers are both owners and creditors. This dual quality contributes to minimization of agency costs resulting from conflicts between debtors end owners that characterize private companies. Agency costs should consequently be lower in cooperatives. Cooperatives seem therefore to be at least as efficient as privates companies. In microfinance, some private companies result from the transformation of non-profitmaking microfinance organizations into regulated MFIs. This transformation is considered as 'a natural progression' and is supported by some microfinance practitioners (Ledgerwood and White, 2006; White and Campion, 2002). According to these practitioners, the governance system of non-profit-making organisations is less effective than that of regulated MFIs. Thus, assuming that a governance system is effective, its bodies are competent, efficient and motivated, private companies have better control of managerial discretion and are therefore more efficient than cooperatives and NGOs. MFIs that are established in the form of limited companies exert greater control over managerial discretion, and as a result, perform better than non-profit-making MFIs. The results of the study of 39 transformation cases by Fernando (2004) tend to support this proposition. Results indicate that most transformation improves both the governance system and the financial performance of MFIs. The most illustrative cases are BancoSol in 1992 FFP Caja Los Andes in 1996, Banco Ademi in 1998; MiBanco in

1998; Compartamentos in 1999. However, the scope of this study is tempered by the failure of Corposol in Colombia (Labie, 1998) and by the findings of empirical studies which compare MFI performances according to legal status. They contrast with the theory of transformation and do not confirm the idea that private microfinance companies are the most efficient and the most effective form of ownership in microfinance. Indeed, Mersland and Strøm (2008, 2009) found no significant difference in performance between financial and social NGOs and private microfinance. From a sample of 89 MFIs, Gutierrez-Nieto et al. (2009) also found no significant difference in financial efficiency between NGOs and private microfinance. They showed that NGOs are more socially efficient than private companies when the outreach is measured by the number of women borrowers. According to Mersland (2009), cooperatives and NGOs are more efficient than private microfinance companies, if the design of the contracts is taken as the basis for comparison. They grant more credit in size than private companies. In addition, operating costs are lower in these institutions because the majority of employees are volunteers (Gutiérrez-Nieto et al, 2007). When property rights are used as the basis for comparison, private microfinance companies are considered more efficient. In microfinance, there is little empirical evidence about the comparative advantage of cooperative. However, conclusions of the banking literature on this issue converge. In banking, a consensus seems to have emerged from empirical studies that compare the performance of private owned banks and cooperative banks. Over the period from 1983 to 1993, Valnek (1999) shows that British mutual’s performed better than private banks. In Germany, Altunbas et al. (2001) show that mutual’s are more efficient and perform better than private sector banks. Ory et al. (2006), over the period from 1990 to 1999, show that the performance of French cooperative banks is at least as good as that of private banks. Cooperatives and mutuals are at least as efficient as stock banks.

Geographical location and MFIs performance Regarding the relationship between the geographical location and performance of MFIs, Lafourcade et al. (2006) studied a sample of 163 African MFIs and showed that African MFIs socially perform better than those of other regions. In contrast, although African MFIs are profitable, their overall financial performance remains below that of other regions. From a sample of 124 MFIs, Cull et al. (2007) empirically establish that MFIs in Eastern Europe, Central Asia and Africa are more profitable and more sustainable than those of other regions. Moreover, risk portfolio of MFIs in South Asia is significantly lower than in other regions. They also found that African MFIs are more socially efficient. Gutierrez-Nieto et al. (2009) showed that MFIs in Asia have levels of social performance significantly higher than MFIs in Africa, Latin America and Central Europe, while those in Latin America seem more cost effective. The profitability and the sustainability of MFIs in Africa are significantly lower than those of other regions. In light of this literature review, it seems hard to reach any consensus in respect of either an association between legal form and performance, or between performance and geographical area. Moreover, it shows that an empirical gap exists in the interaction of those two factors on the performance of MFIs. The multivariate analysis of variance (MANOVA) will thus enable us firstly to feed the debate on the relationship between legal form, geographical location and performance, and secondly to fill the empirical gap on the role played by the interaction factor.

2. Methodology 2.1 Data Research methodology is based on a comparative framework and follows that of Valnek (1999), Ory et al. (2006), Mersland and Strom (2008) and Gutierrez-Nieto et al. (2009). Data came from the Microfinance Information Exchange (MIX) database. MIX is a platform of global information about microfinance. The sample is drawn up in two stages. Firstly, we focus exclusively on MFIs with a ranking of four or five diamonds by MIX. The quality of data provided by these institutions is high. Level 4 diamond MFIs disclose information relating to their impact. Their financial statements (Balance sheet and Profit and Loss Account) are audited and certified by accountants and auditors. For level 5, in addition to the MFI characteristics in level 4, MFIs are rated by agencies specialized in microfinance rating. A first sample was put together of 322 microfinance institutions with a diamond level 5, and 434 diamond level 4 microfinance institutions of which 99 were cooperatives, 299 NGOs and 319 private companies. Secondly, only organizations for which financial data were available over the period from 2001 to 2005 were selected. Also, microfinance operations account for at least 91% of the activity within the organizations that we chose. We therefore considered only MFIs that are engaged almost exclusively in the business of microfinance. Those that diversified their portfolio activity have been excluded as well as organizations engaged in "downscaling", that is to say organizations engaged in the activity of microfinance as a secondary business. The final sample comprised 202 microfinance institutions that are registered as cooperatives, limited companies or non-profit-making organizations, and located in three main geographical areas: Latin America and the Caribbean, Africa, Eastern Europe and Asia (Table 1). ([Table 1 Here])

2.2 Variables. Since MFIs are non-listed, we selected only accounting indicators for measuring performance. The financial performance of MFIs is measured by profitability and sustainability (financial viability) indicators (Bruett, 2005; Hartarska, 2005; Lafourcade et al., 2006, Cull et al. 2007; Mersland and Strøm, 2009, 2008). We used a profitability indicator that may have the same interpretation as in MFI legal status, and may facilitate comparisons. This led us to retain the economic rate of return or ROA (Return on Assets). Unlike ROE, ROA has the advantage of measuring profitability regardless of the financial structure of the institution and therefore enables commercial and noncommercial MFI comparison (Bruett, 2005). Sustainability is measured by the ratio of operational self-sufficiency (OSS). We have extended performance in its social and organizational, and portfolio quality dimensions. Social performance is measured by two indicators: Outreach (the number of active borrowers) and an indicator measuring the intensity of transactions (DEPTH) (Hartarska, 2005, Cull et al. 2007; Hartarska and Nadolnyak, 2007). Organizational performance is measured by the operating expenses ratio (OER) and the cost of credit per borrower (CPB). The portfolio quality is measured by the portfolio at risk at 30 days (PAR). Table 2 summarizes the various indicators used to measure the efficiency and quality of the portfolio. ([Table 2 Here]) 3. Main results In order to test the significance of differences in financial, social and organizational performance, we carried out a multivariate analysis of variance (MANOVA). Firstly, we identified the multi-colinearity of our dependant variables. The Pearson co-linearity test (Table 3) shows that most intra-dimensional and inter-dimensional (dimensions between financial, social and organizational performance) linear relationships are significant. The correlation coefficients are high for the relationship between: profitability and financial

viability (0.599), profitability and organizational efficiency (-0.648) and size and outreach (0.66). The assessment of multi-colinearity reveals that dependent variables that are strongly and significantly correlated have, as with other dependent variables, a Variance Inflation Factor (VIF) below 10 (Table 4), the maximum being 3.78. Therefore, variables which are strongly correlated have little effect on the model. The existence of several correlated dependent variables, as shown in the review of multi-colinearity, and the purpose of this research, namely the study of the combined influence of the legal and geographical area, led us to adopt a multivariate analysis of variance for the comparative study. ([Table 3 Here]) The Levene test indicates that variables do not meet the assumption of homogeneity of variances. Therefore we used the Pillai test for assessing the overall validity of the model (Table 4). This test is significant at 1% indicating that the performance of MFIs differs according to their legal status and their geographical location. Furthermore, the interaction effect is significant, indicating that the performance of MFIs is affected by the combined effect of legal status and their geographical location. ([Table 4 Here]) Table 5 presents the results of the ANOVA performed respectively on the variables geographical area, legal form and their joint effect. The results lead us to conclude that there is a significant difference in financial, social and organizational efficiency by geographical area and by the combined effect of legal status and geographical area. In contrast, no significant difference in financial performance and organizational efficiency is found when these dimensions of performance are measured respectively by the rate of economic return (ROA) and the operating expenses ratio (OER). This result on the profitability of MFIs is consistent with (Mersland and Strøm, 2008, 2009). ([Table 5 Here])

We then proceed to an inter-group comparison (Table 6). Descriptive statistics according to the legal status show that, on average, the microfinance institutions are sustainable (1.134) and profitable (0.006), irrespective of their legal status and their geographical area. However, the average profitability of private microfinance (0.013) is lower than that of cooperatives (0.014). The average operational self-sufficiency of cooperatives (1.244) is higher than other MFIs. Cooperatives are more efficient (OER). The average ratio of PAR (0.066) is below the threshold of 0.1. This indicates that the average credit portfolio in our sample is healthy. Private companies have the lowest average PAR. Descriptive statistics by region show that MFIs in Eastern Europe and Asia are more profitable (0.042) and more sustainable (1.284). They also have a portfolio risk lower than other regions. The amount of credit granted (DEPTH) is greater on average in the African zone while Latin America is the region with the highest number of active borrowers. We also assessed the significance of differences observed using the Tamhane test, which is appropriate when the hypothesis of homogeneity of variances is not met (Table 6). The results concerning the financial efficiency of MFIs are not consistent with the transformation thesis. We found no significant difference between sustainability of private companies and NGOs. It appears that private companies have a better portfolio quality than other MFIs. ([Table 6 Here]) In contrast, no significant difference in portfolio risk is found between the cooperatives and NGOs. Similarities in credit decision process could explain this result. Indeed, the decision to grant credit is decentralized in most NGOs and cooperatives. MFIs that collect deposits (cooperatives and private companies) have significantly higher social performance levels than NGOs, when the intensity of transactions is used as a basis for comparison. Our results also show that commercial MFIs (private companies) are

more socially efficient than non-commercial MFIs (cooperatives and NGOs) when the outreach is used as a basis for comparison. The market approach seems not to be inconsistent with the social mission of MFIs. The results related to geographical area showed that the difference in financial performance and portfolio quality observed between MFIs in Latin America and those of Eastern Europe and Asia is not significant. Moreover, there is very little difference in outreach and organizational efficiency among MFIs in these two regions. The comparative study shows that African MFIs are financially less efficient than those of Latin America, Eastern Europe and Asia. The credit activity is more risky in the MFIs in Africa and the Middle East. Furthermore, the profitability and financial sustainability of MFIs in Africa are significantly lower than those of MFIs in other regions. This result is consistent with those of Lafourcade et al. (2006) and Gutiérrez-Nieto et al. (2009). When the transaction intensity (DEPTH) is taken as a basis for comparison, the amount of credit granted by MFIs in Africa is significantly higher in African MFIs. This result is consistent with that of Cull et al. (2007). MFIs in Latin America and those of Africa seem to have a better control of costs relating to allocation of resources. The following figures allow us to compare the influence of the interaction effect on the three dimensions of performance. According to Figures 1 and 2, there is very little difference in profitability and financial sustainability between private companies and NGOs in regions 1 (Latin America) and 2 (Eastern Europe and Asia). In both regions, the transformation thesis is not validated if one takes financial efficiency as the basis of comparison. Cooperatives are more profitable and more sustainable than private companies and NGOs in Africa (region 2) and in the EEA area (Region 3). This comparative advantage is more important in Eastern Europe and Asia. The portfolio at risk (Figure 3) is best in region 3, indicating that private companies manage their portfolio risk more efficiently in Eastern Europe and Asia.

The results tend to confirm the idea that the commercial approach of microfinance is not incompatible with the social mission of MFIs (Figure 4). Indeed, in the three regions the amount of credit allocated by private microfinance is higher than that of other legal forms. However, the differences between legal forms are very low with regard to African MFIs. When social efficiency is measured by the intensity of transactions (Figure 5), no difference in performance was found between both private companies and cooperatives in Latin America, and also between NGOs and cooperatives in Eastern Europe and Asia. In Latin America and in Africa, the social efficiency of cooperatives and private companies is greater than that of NGOs. In those regions, MFIs that collect deposits are socially more efficient than NGOs, irrespective of the geographic area. In Latin America no significant difference in efficiency in the allocation of resources is found between private companies and NGOs. Credit operations are less costly in Latin American and African cooperatives (Figure 6 and 7). This is not the case in Eastern Europe and Asia where this institutional form is very inefficient in allocating resources. ([Insert Figure 1 to 7 Here])

Conclusion The aim of this paper was to answer the question of whether the interaction effect between the geographic and legal status influences the performance of MFIs. We opted for a multidimensional approach to performance. Three forms of ownership were identified: cooperatives, private microfinance organizations, and non-profit microfinance organizations. In order to answer this question, we carried out a multivariate analysis of variance (MANOVA) on a sample of 202 MFIs over the period 2001-2005. The results of the comparison of MFIs according to their legal status do not validate the transformation thesis when the financial efficiency of MFIs is used as a basis for comparison. Those related to the

geographical area show no significant difference between MFIs in Latin America and those of Eastern Europe and Asia. African MFIs are financially less efficient but have a better control of costs relating to capital allocation. Assessing the effect of interaction between the legal status and geographical area does not validate the transformation thesis in Latin America and Eastern Europe. In both regions, the financial performance of NGOs is at least as much as that of private companies. In addition, the commercial approach to microfinance does not seem incompatible with the social mission of MFIs regardless of the region when focus is on the number of borrowers. MFIs that collect deposits have greater social efficiency in Africa and in Latin America. Transformation can therefore improve the social efficiency of MFIs in these regions. We have mainly studied the influence of the legal status of MFIs on their financial and social efficiency. Transformation would influence the financial structure of these organizations. It would be accompanied by an increase in resources needed to finance investments in MFIs and consequently their growth. Therefore, it seems useful to extend this research further by examining the influence of transformation on the evolution of the financial structure of MFIs.

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Hartarska, V. & Nasdolnyak, D. (2007). Do regulated microfinance institutions achieve better sustainability and outreach? Cross country evidence. Applied Economics 39 (10), 1207-1222. Hartarska, V. (2005). Governance and performance of microfinance institutions in central eastern europe and the newly independent states. World Development 33 (10), 16271643. Jansson, T., Rosales, R., & Westley, G.D. (2004). Principles and Practices for Regulating and Supervising Microfinance, Inter-American Development Bank, Washington. Lafourcade, A-L., Isern, J., Mwangi, P., & Brown, M. (2006). Overview of the outreach and financial performance of microfinance institutions in Africa. Micro Banking Bulletin 12, 3-21. Ledgerwood, J., & White, V. (2006). Transforming Microfinance Institutions: Providing Full Financial Services to the Poor. World Bank. Mersland, R. (2009). The cost of ownership in microfinance organizations. World Development 37 (2), 469-478. Mersland, R., & Strøm, R.Ø. (2008). Performance and trade-offs in microfinance institutionsdoes ownership matter? Journal of International Development 20 (5), 598-612. Mersland, R., & Strøm, R.Ø. (2009). Performance and governance in microfinance institutions. Journal of Banking and Finance 33 (4), 662-669. Mersland, R., & Strøm, R.Ø. (2010). Microfinance mission drift? World Development 38 (1), 28-36. Forhcoming Microbanking Bulletin, 2009 Mosley, P., & Hulme, D. (1998). Microenterprise finance: is there a conflict between growth and poverty alleviation? World Development 26 (5), 783-790.

Ory, J-N., Jaeger, M., & Gurtner, E. (2006). La banque à forme coopérative peut-elle soutenir durablement la compétition avec la banque SA ? Finance Contrôle Stratégie 9 (2), 121-157. Peck, R., & Rosenberg, R. (2000). The rush to regulate: legal framework for microfinance. CGAP Special Edition, n° 4. Valnek, T. (1999). The comparative performance of mutual building society and stock retail banks. Journal of Banking and Finance 23, 925-938. White, V., & Campion, A. (2002). Transformation: Journey from NGO to Regulated MFI. In D. Drake & E. Rhyne (Eds.), The commercialization of microfinance: balancing business and development. Connecticut: Kumarian Press.

List of tables Table 1: Distribution of MFIs by geographical area and legal status

Latin America Africa REGION Eastern Europe and Asia Total

LEGAL FORM Private Cooperatives NGOs companies 50 100 90 110 230 185

Total 240 525

10

170

65

245

170

500

340

1010

 

Table 2: Description of variables Nature of the variable

Identity of the variable and Measurement Economic Profitability

ROA

Operational selfsufficiency

OSS

Portfolio at Risk

PAR

Outreach

NAB

Depth

DEPTH

Operating expenses Ratio or efficiency ratio

OER

Cost per Borrower

CPB

Financial Performance and risk

Social performance

Organizational Efficiency

Dependent variables

 

Location (REG) Legal status (LEG-STAT)

AF EEA LAC COOP SHF NGOs

Definition Net income / total assets Measurement of the capacity of the MFI to use its assets to generate a return Financial Revenue (Total)/ (Financial Expense + Loan Loss Provision Expense + Operating Expense). Capacity of the MFI to cover these costs with its available products (Outstanding Balance on Arrears over 30 days + Total Gross Outstanding Refinanced (restructured) Portfolio) / Total Gross Portfolio Measurement of portfolio quality. It shows the part of the portfolio affected by outstanding payments, where there is a risk that they will not be repaid. The threshold is < 10% given that financial guarantees in microfinance are not always sufficient. Number of Active borrowers Average Loan Balance per Borrower/ GNI per Capita (%) Operating costs / average gross portfolio   Measurement of the efficiency of an institution. It measures the costs necessary for an institution to provide credit. The lower the ratio, the more efficient the institution is (the costs are affected by the wage bill). Operating costs / average number of active borrowers. This ratio gives a clear measurement of the efficiency of the institution by showing the average cost to serve a borrower over a year. Africa Easter Europe and Asia Latin America and Caribbean Cooperatives Shareholder Firms Nongovernmental organizations

Table 3: Pearson correlation matrix and correlation test ROA OSS PAR LN_NAB DEPTH ROC CPB ROA 1 OSS 1 0.599 *** PAR -0.151 *** -0.1627 *** 1 LN_NAB 0.109 *** 0.123 *** -0.104 *** 1 DEPTH 0.098 *** 0.133 *** -0.05 -0.188 *** 1 OER 0.078 ** -0.178 *** -0.155 *** 1 -0.648 *** -0.398 *** CPB -0.036 -0.04 -0.094 *** -0.363 *** 0.419 *** 0.095 *** 1 VIF 2.34 1.61 1.08 3.44 1.34 2.12 2.06 *, **, *** significant at 10%, 5% and 1% respectively ROA: Return on Assets; OSS: Operational Self-sufficiency; PAR: Portfolio at Risk; LN_NAB: Natural Logarithm of the number of active borrowers; DEPTH: Intensity of Transaction; OER: Operating Expenses Ratio; CPB: Cost per borrower; VIF: Variance Inflation Factor

Table 4: Results of the multivariate analysis. Factors Value REG 0.319 LEG_STAT 0.243 Interaction 0.260 REG*FORM_JUR REG: Geographical area; LEG_STAT: Legal Status

F 27.018 19.648 9.898

Sig. 0.000 0.000 0.000

Table 5: Results of ANOVA REG

Variables F ROA

FORM_JUR Sig.

F 0.744

Sig 0.475

Interaction REG*FORM JUR F Sig 5.384 0.000

19.826 0.000 47.962 0.000 26.596 0.000 11.747 0.000 PAR 0.02 0.037 8.597 0.000 3.937 2.556 LN_NEA 22.896 0.000 57.294 0.000 13.208 0.000 DEPTH 0.001 0.007 10.490 0.000 7.365 3.539 OER 0.282 16.747 0.000 1.269 7.659 0.000 CPB 32.821 0.000 17.982 0.000 15.037 0.000 REG: Geographical area; LEG_STAT: Legal Status; ROA: Return on Assets; OSS: Operational Self-sufficiency; PAR: Portfolio at Risk; LN_NAB: Natural Logarithm of the number of active borrowers; DEPTH: Intensity of Transaction; OER: Operating Expenses Ratio; CPB: Cost per borrower. OSS

 

Table 6.1: Multiple comparison by legal form Performance dimension Financial performance

Variables PAR OSS

Panel 1 COOP n= 170 0.086 1.244

Panel 2 PC n= 500 0.054 1.134

Panel 3 NGO n= 340 0.074 1.08

Total n= 1010 0.066 1.134

Panel 1 vs Panel 2

Panel 1 vs Panel 3

Panel 2 vs Panel 3

0.032 *** 0.11

0.012 0.164 **

-0.019 ** 0.053

-0.852 *** -0.383 ** 0.469 *** LN_NAB 8.679 9.531 9.061 9.229 Social performance DEPTH 1.247 0.929 0.604 0.873 0.317 *** 0.642 *** 0.324 *** Organisational CPB 133.44 156.896 110.384 137.290 -23.456 23.056 46.541 *** efficiency Significant at 10%, ** significant at 5%, *** significant at 1%. Panel 1: Cooperatives; Panel 2: Private companies (SHF); Panel 3: NGOs. OSS: Operational Self-sufficiency; PAR: Portfolio at Risk; LN_NAB: Natural Logarithm of the number of active borrowers; DEPTH: Intensity of Transaction; CPB: Cost per borrower.

Table 6.2: Multiple comparison by geographical area Performance dimension

Variables

Panel A LAC

Panel B AF

Panel C EEA

Total

Panel A vs Panel B

Panel A vs Panel C

Panel B vs Panel C

n= 240 n= 525 n=245 n= 1010 0.034 -0.022 0.042 0.007 0.057 *** -0.007 -0.064 *** ROA 0.054 0.082 0.043 0.066 -0.029 *** 0.01 0.039 *** PAR 1.203 1.033 1.284 1.134 0.169 *** -0.081 -0.25 *** OSS 0.197 9.251 9.053 9.229 0.111 0.308 * LN_NEA 9.362 Social performance DEPTH 0.691 0.998 0.783 0.873 -0.308 *** -0.092 0.215 ** OER 0.242 0.431 0.286 0.351 -0.189 *** -0.045 * 0.145 *** Organisational efficiency CPB 163.416 112.727 164.33 137.290 50.689 *** -0.918 -51.607 *** * Significant at 10%, ** significant at 5%, *** significant at 1%. Panel A: Latin America; Panel B: Africa and Middle East; Panel C: Eastern Europe and Asia REG: Geographical area; LEG_STAT: Legal Status; ROA: Return on Assets; OSS: Operational Self-sufficiency; PAR: Portfolio at Risk; LN_NAB: Natural Logarithm of the number of active borrowers; DEPTH: Intensity of Transaction; OER: Operating Expenses Ratio; CPB: Cost per borrower. Financial performance

 

List of Figures Figure 1: Profitability

Figure 5: Transaction Intensity Figure 2: Operational self-sufficiency

Figure 6: Operating expenses ratio Figure 3: Portfolio Quality

Figure 4: Number of Active Borrowers Figure 7: Cost per borrower

Legal form: 1: Cooperatives; 2: Private Companies; 3: NGOs Region: 1: Latin America and Caribbean; 2: Africa and Middle East; 3: Eastern Europe and Asia.

 

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