The effect of asset and liability management on the financial performance of microfinance institutions: evidence from sub-Saharan African region

Abstract

This study applies statistical cost accounting method to a sample of 106 sub-Saharan African microfinance institutions (MFIs) during 2014–2018 to investigate the relationship between asset-liability management and financial performance. The result shows that the composition of assets and liabilities has both positive and negative effects on the returns of the MFIs in the sample. Net loan portfolio, other current financial liabilities and MFI size are significantly and positively related to return on assets of listed MFIs. Deposits, borrowings and other liabilities, on the other hand, are significantly and negatively related to financial performance. Overall, the study suggests that adequate attention needs to be paid to asset-liability management to ensure better financial performance.