Focus on Women in Microfinance Institutions

Abstract

We provide empirical evidence on focusing on women in microfinance and its consequences for microfinance institutions (MFIs). Based on a global dataset, the results indicate that a focus on women is associated with group-lending methods, international orientation, smaller loans, and non-commercial legal status. We find that a focus on women significantly improves repayment but does not enhance overall financial performance because of higher relative costs. Moreover, the higher relative costs do not stem from servicing women per se but from the smaller loans offered to women and the group-lending methodology practised by MFIs focusing on women.

Notes

1. See http://www.microcreditsummit.org.

2. This figure is similar to what is found in earlier literature (see, for example, Cull et al., 2007; Daley-Harris, 2007).

3. See, for example, Chant (1985), Haddad and Hoddinod (1995), Kabeer (1997), Senauer (1990), and Thomas (1990).

4. The Hausman-Taylor approach is essentially an instrumental variables approach that fits RE models in which some of the covariates may be correlated with the unobserved institution-specific effect μ _i (Hausman and Taylor, 1981). We prefer this method over traditional Random-Effects models (RE) because it takes into account the endogeneous nature of the covariates and because a Hausman-specification test does not support the null-hypothesis that the RE provides a consistent and efficient estimator. As a further robustness check we re-ran analyses using RE as well as an IV regression where the gender variables were instrumented by the MFI characteristics. These robustness checks yield similar results and are not reported in the results section.