FEMALE ADVANTAGE? MANAGEMENT AND FINANCIAL PERFORMANCE IN MICROFINANCE

Sigurdur Gudjonsson,Haukur Freyr Gylfason,Inga Minelgaite,Kari Kristinsson

doi:10.3846/btp.2020.11354

Abstract

The purpose of the article is to investigate whether female presence in microfinance institutions’ management team, i.e. board members, managers and loan officers, will improve their financial performance. We combine financial data on MFIs that is available from the MIX Market database with original data on the gender composition of MFIs’ management team, who include board members, managers and loan officers. This original dataset of 223 MFIs is analyzed using Logit-Tobit regression models with return on assets (ROA) as the dependent variable and proportion of female board members, female loan officers and female managers as the main independent variables. We find that a higher proportion of female managers and female loan officers improve financial performance in microfinance, while a higher proportion of female board members does not. Our results indicate that a major contributor to the financial sustainability of microfinance institutions is having a higher rate of women in vital decision-making roles, especially lower level management positions.

Highlights

Microfinance institutions (MFIs) are vehicles designed to help the poor who are stuck in a poverty cycle resulting from information asymmetry and lack of collateral for standard loans (Armendáriz and Morduch 2007)
Previous studies linking gender diversity in MFIs to their financial performance have predominantly focused on the board level (Bassem 2009)
The diversity in the composition of the board might be a poor proxy for the effects of gender diversity on financial performance, since key decision makers are at various levels in the organization

Summary

Introduction

Microfinance institutions (MFIs) are vehicles designed to help the poor who are stuck in a poverty cycle resulting from information asymmetry and lack of collateral for standard loans (Armendáriz and Morduch 2007). Recent researches indicates that MFIs’ management systems would improve with an increased female presence (Bassem 2009, Strom et al 2014, Hartarska et al 2014, Vishwakarma 2017, Ghosh and Guha 2019). This is an important issue since the MFIs are female-oriented on the customer side, about 70 percent of all microfinance borrowers are women (Armendáriz and Morduch 2007, Reed 2011). Despite the fact that researches on female management and MFI performances are still relatively

Objectives

Findings

Discussion

Conclusion