Business Management Models of Microfinance Institutions (MFIs) in Africa: A Study into Their Enabling Environments

Business Management Models of Microfinance Institutions (MFIs) in Africa: A Study into Their Enabling Environments

Nadya Pashkova (Marketing and Consumer Behaviour Group, Wageningen University, Wageningen, The Netherlands), Andres Trujillo-Barrera (Marketing and Consumer Behaviour Group, Wageningen University, Wageningen, The Netherlands), George Apostolakis (Centre for Entrepreneurship, Governance and Stewardship, Nyenrode Business University, Breukelen, The Netherlands), Gert Van Dijk (Social Venturing Economics and Impact Investment at TIAS, Tilburg University, Tilburg, The Netherlands), Periklis D. Drakos (Department of Economics, University of Crete, Heraklion, Greece) and George Baourakis (Mediterranean Agronomic Institute of Chania (CIHEAM-MAICh), Chania, Greece and Nyenrode Business University, Breukelen, The Netherlands)
Copyright: © 2020 |Pages: 23
DOI: 10.4018/978-1-7998-3019-1.ch004
OnDemand PDF Download:
No Current Special Offers


In this study, the authors analyse the socioeconomic, political and geographic conditions that are conducive of cooperative microfinance initiatives in comparison with other organizational forms in Africa. They distinguish three types of institutions (MFIs) and business models: cooperatives/credit unions, non-profit or non-governmental (NGOs and commercial banks). To analyse the enabling environment for the three business models three types of factors are distinguished: macroeconomic policy, institutional, and geographical. Multinomial logistic regression is applied to investigate the impact of these external conditions. The authors use data on 1790 MFIs in selected African countries (MIX Market) and global socioeconomic data of these countries. Their findings reveal that irrespective geographic location, cooperatives feature in countries with civil law systems, low inflation rates and high levels of economic growth. Commercial MFIs (banks) feature particularly in the countries with common law legal systems. NGO type MFIs are associated with high inflation rates and low levels of economic growth.
Chapter Preview

2. Conceptual Framework

Microfinance differs from conventional finance as it provides financial services to low-income population1 (CGAP, 2006). The success of microfinance varies considerably across countries (Morduch & Haley, 2002). Differences are mostly explained by the importance of the external contextual environment on institutional sustainability and efficiency (Ahlin, Lin, & Maio, 2011; Crabb, 2008; Cull & Morduch, 2007; Hartarska & Nadolnyak, 2007; Vanroose & D’Espallier, 2009).

Another stream of literature shows that institutional type of microcredit providers influences the differences in outreach and sustainability of the MFIs (Hartarska, Mersland, Nadolnyak, & Parmeter, 2013; Mersland & Strøm, 2008). The social and financial performance naturally result from the mission and vision of the MFIs.

We use a similar approach to Tchakoute-Tchuigoua (2010), who has explained the choice of MFI’s organizational type (ownership) by their geographical location. An effort to relate the organizational type of MFIs with the environment was not further researched in microfinance literature. To fill this gap, we estimate an influence of external environment, measured from various perspectives, on MFI’s organizational models.

Our research question is: Which factors (macroeconomic, institutional and geographical) are conducive for the three distinguished business models of MFIs in Sub Sahara Africa?

The description of the variables used is given in the following sections.

Complete Chapter List

Search this Book: