Performance of Listed Microfinance Institutions

• DOI: http://doi.org/10.1002/jsc.2117
• Date: 01 March 2017
• Author: Lâma Daher,Erwan Saout
• Published date: 01 March 2017

RESEARCH ARTICLE

Strategic Change 26: 145–158 (2017)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.2117

Copyright © 2017 John Wiley & Sons, Ltd.

Strategic Change: Briengs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.2117

Performance of Listed Micronance Institutions1

Lâma Daher

University Paris 1 Panthéon‐Sorbonne (PRISM), France

Erwan Le Saout

University Paris 1 Panthéon‐Sorbonne (PRISM), France

Investment in micronance equity may improve portfolio diversication and attract

socially responsible investors.

Micronance is the provision of formal nancial services to unemployed or

low‐income individuals or groups who lack access to a variety of nancial prod-

ucts and services at a reasonable price. Micronance thus provides nancial

services to certain population segments, primarily in developing countries. ese

services are delivered by micronance institutions (MFIs), which include a range

of providers, varying by legal structure, mission, and methodology. e underly-

ing goal is to make the nancial system more inclusive, empowering the poor

by providing them with loan capital and services to support income‐generating

activities.

In recent years, the micronance sector has undergone profound changes. e

micronance sector is being increasingly criticized. Poverty reduction no longer

seems to be the main objective of micronance institutions. It has evolved from

a community of donors, led by philanthropic goals, to a rapidly growing market

that attracts investors seeking a social impact and nancial performance. Morduch

(2000) refers to this cleavage as the micronance schism. More and more institu-

tions want to become nancially sustainable and subsidy‐free. ese organizations

therefore focus on improving their nancial performance. A nancially protable

and sustainable MFI is likely to nd nancial resources for its needs and growth

more easily than an MFI seeking to maximize only its social impact. Christen

(2001) emphasizes that many people fear that commercialization drives micro-

nance institutions to deviate from their original mission. Indeed, it seems that

they increasingly cater to customers who are better o than their original custom-

ers (Mersland and Strøm, 2010). However, these authors cannot conclude that

the MFI shows statistically signicant mission drift.

1 JEL classication codes: G11, G21, G23, G29, O16.

Micronance is an asset class

with a double bottom line: social

and nancial returns have to be

generated.

Adding listed micronance to

international asset portfolios

improves the risk–return

performance.

Micronance institutions are likely

to attract capital from socially

responsible investors seeking new

investment opportunities.

Signicant currency risk may

affect the performance of listed

investments in micronance.