Big Banking Principles and Financial Performance - Outreach Relationship: An Application to the Microfinance Sector

Abstract

This paper investigates the MFI performance and outreach relationship and examine whether big banking principles also apply to microfinance institutions (MFIs) and may help explaining the above-mentioned link. Unlike previous work analyzing the relationship between financial performance and outreach, we apply conditional quantile regressions to grasp the differences observed across MFIs. Our study unveils that big banking principles can be extended to the microfinance sector. Indeed, we find that increasing assets improves performance among MFIs that already have large profits. We also find that an increase in assets induces less small loans.