Abstract
In the last few years, considerable attention has been paid to microfinance as a relevant participant in the formal financial system, whose target audience is people who are otherwise at risk of financial exclusion. In parallel, sustainability and the promotion of Sustainable Development (SD) are imposed as the theoretical frame when facing any study. This, connected with cultural and organizational dimensions theories, are the analytical framework for the analysis of the relationship between the context of performance in which Microfinance Institutions (MFIs) operate and their activity in promoting sustainability. A holistic approach is necessary to make operational these concepts; for that reason, financial, environmental, social and governance dimensions (FESG), and the balance among them, have to be considered. The main objective of the paper is to explore to what extent MFIs are fostering SD, and how this promotion is performed by region. For the analysis, two different sources of information have been studied: sectoral academic literature that focuses on the different sustainability dimensions, and MIX Market sustainability data obtained from the MFIs. A keyword analysis of the selected papers has been executed to be conscious of the most investigated aspects by region; on the data provided by the institutions, a Kruskal-Wallis H test has been performed to learn what the main Sustainability Indicators (SIs) are that are reported affirmatively. To obtain comprehensive research, a comparative study of the results offers the convergences, divergences and gaps of information in each of the regions. The findings show significant differences depending on the region, and confirm that operationalization should be adjusted at the regional context of the MFIs. The paper, with the inherent limitations due to data quality, also offers recommendations for the better promotion of sustainability in each of the regions.
Highlights
The microfinance system offers financial services worldwide, especially in emerging markets, to a population with limited access to the conventional financial market or at risk of financial exclusion
When academic research documents are compared with the number of institutions that report their activities by region, we find that in South Asia, Africa and East Asia and Pacific (EAP), the information we manage almost exclusively proceeds from research
In the case of Latin America and Caribbean (LAC), the situation is inverse; the number of articles in this region is low compared to the number of institutions that present their sustainability data
Summary
The microfinance system offers financial services worldwide, especially in emerging markets, to a population with limited access to the conventional financial market or at risk of financial exclusion. Low-income clients seek microfinance to attend to solving basic needs, personal emergencies or the expansion of a small business, among others. This lending business that is constantly growing, presented in 2018 around 916 Microfinance Institutions (MFIs), with an estimated USD 124 billion gross loan portfolio, and resulting in 140 million active borrowers worldwide, where 80% are women and 65% are rural borrowers [1]. According to the Microfinance Barometer 2019, the Latin America and Caribbean (LAC) region presents the highest number of MFIs (248 institutions) and the largest credit portfolio (48.3 billion). The regions with the highest percentage of rural clients are East Asia and Pacific (EAP) and South
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