DETERMINANTS OF PROFITABILITY IN SOUTH ASIAN MICROFINANCE INSTITUTIONS
SANJU ADHIKARY *
Department of Economics, Aristotle University of Thessaloniki, Thessaloniki, Greece.
GEORGE PAPACHRISTOU
Department of Economics, Aristotle University of Thessaloniki, Thessaloniki, Greece.
*Author to whom correspondence should be addressed.
Abstract
In this paper, we empirically investigate the institution, industry and country specific factors that influence the Microfinance Institutions (MFIs) profitability in South Asia. To this, a panel of 114 MFIs from 2003 to 2011 is examined using static and dynamic panel methods. Our results show that cost-efficiency is the primary determinant of profitability. In addition, strong capitalization, liquidity, and industry concentration relate positively with MFI profitability. On the other hand, credit risk reduces it, while macroeconomics factors do not have a significant effect. These findings are robust to the various definitions of profitability.
Keywords: Profitability, capital, credit risk, efficiency, liquidity, panel data