This paper tests the strength of association between
variables that determines the outreach (level of reach to the
poor) of Microfinance Institutions (MFIs) and financial
performance indicators. That is: Is there a trade-off between
reaching the poor and being sustainable? Using data from
the Microfinance Information Exchange website, the paper
employed panel data regressions to investigate the trade-off.
The evidence collected from 70 MFIs and 135 observations
from The Economic Community of West African States
(ECOWAS) for a period of 4 years (2009-2012) found
evidence in support of the trade-off theory. The fact that
Banks as compared to the Solidarity lenders had higher
Loan/GNP is compelling evidence of a trade-off, as Banks
traditionally employ sustainable models. Furthermore,
increasing interest rates was found to be associated with
improved sustainability. Therefore, the proliferation of For-
Profit Banks in the microfinance landscape over the years is
a reason to worry about meeting “The Microfinance
promise”. That is helping in poverty alleviation.
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