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ABSTRACT
This article examines the effects of location and legal status on the performance of microfinance institutions (MFIs) within sub-Saharan Africa (SSA) using panel dataset of 138 MFIs in 31 SSA countries covering 2004 to 2014. The econometric results show that legal status and location significantly influence the capitalisation, portfolio quality, profitability, liquidity, and deposit mobilisation of MFIs. MFI credit growth and deposit growth are similar across locations, but significantly differ by legal status. Most importantly, we found new evidence that location has moderating effect on the legal status–performance nexus of MFIs within SSA.
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No potential conflict of interest was reported by the author(s).
Notes
1 The MIX database is a web-based microfinance platform that provides data on individual MFIs. See www.mixmarket.org.
2 The countries included in our analysis are Angola, Benin, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Democratic Republic of the Congo, Republic of the Congo, Cote d'Ivoire, Ethiopia, Gambia, Ghana, Guinea, Kenya, Madagascar, Malawi, Mali, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, South Africa, Swaziland, Tanzania, Togo, Uganda and Zambia.
3 Some NGOs are already allowed to mobilise deposits.
4 “Ghana has comparatively high reserve requirements. Rural banks must hold 5% of total deposit liabilities with the ARB Apex Bank, 8% as primary (cash and balances with other banks) and 20% to 30% as secondary (Government and Bank of Ghana bills, bonds and stocks) reserve requirements. The percentage rate for the secondary reserve requirement depends on the loan recovery rate”. The liquidity ratio for re-registered MFIs in Ethiopia is 20% (Staschen Citation2003).
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Notes on contributors
Tilahun Aemiro Tehulu
Tilahun Aemiro Tehulu is an Assistant Professor in the Department of Accounting and Finance, Bahir Dar University, Ethiopia.