Start-up microenterprise financing and financial performance of microfinance institutions

Abstract

This article interrogates whether start-up microenterprise financing wields any benefits for the financial performance of microfinance institutions (MFIs). It is done with data from 532 MFIs drawn from 73 countries. Generally, the results show that financial support for start-up microenterprises improves the financial performance of MFIs. This result is robust under different panel estimation techniques. However, an interaction analysis reveals that the positive impact of start-up microenterprise financing on the financial performance of MFIs decreases when start-up microenterprise financing interacts with MFI size. The implication is that larger MFIs are likely to benefit less from funding start-up microenterprises.