WHAT'S BEHIND THE SPREAD OF INVESTMENTS IN MICROFINANCE? FINANCIAL ATTRACTIVENESS OR SOCIAL RESPONSIBLE INVESTMENTS?
The conviction that microfinance contributes to the reduction of poverty has attracted various investors in the sector. With the continuous growth of investments in microfinance, if the social motive is the most plausible, one would expect countries with high rates of poverty and financial exclusion to be the most attractive for investments in this sector. Aiming to understand whether the distribution of investments in different regions is led by the attractiveness of these regions in terms of risk and return or rather in terms of social impact, we use aggregate data on funds invested in the sector through Microfinance Investment Vehicles (MIVs) to study the spread of investments in microfinance around the world. It comes from the results that investments are attracted by financial performance of MFIs in the different regions, considering the return on assets and the return on equity. Further, the expenses over the assets ratio which influences negatively the variation of the investments destination suggests that regions with high cots MFIs don't receive much funds from investors. On the other side, investments seem to be oriented towards regions in which there are already institutions offering financial services, but regions with less access to financial services don't look to be the destination of investments. Is search for profit the most important driver for investments in microfinance? The results seem to go in that direction, but further research with a wider and deeper database would bring more light. However, the outcomes allow us to confirm that even if it is believed to be a poverty fighting tool, not all the investments in the microfinance sector aim the contribution to poverty reduction.
|Keywords: Microfinance; Investments; Profit; Social; Commercialization|
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