6533b836fe1ef96bd12a1c4e

RESEARCH PRODUCT

Geographic diversification and credit risk in microfinance

Leif Atle BeislandRoy MerslandStephen Zamore

subject

Economics and EconometricsMicrofinance050208 finance05 social sciencesDiversification (finance)Financial systemBanking industrylaw.inventionlaw0502 economics and businessBusiness050207 economicsNon-performing loanFinanceCredit risk

description

Abstract This paper examines the relation between geographic diversification and credit risk in microfinance. The empirical findings from the banking industry are mixed and inconclusive. This study extends the discussion into a new international setting: the global microfinance industry with lenders having both social and financial objectives. Using a large global sample of microfinance institutions (MFIs), we find that geographic diversification comes with more credit risks. However, this finding is more pronounced among non-shareholder MFIs like NGOs and cooperatives, compared to shareholder-owned MFIs. Moreover, the results show that MFIs can mitigate the effect of geographic diversification on risk with group lending methodology.

yearjournalcountryeditionlanguage
2019-12-01Journal of Banking & Finance
https://doi.org/10.1016/j.jbankfin.2019.105665