n AfricaGrowth Agenda - Financial sustainability and social outreach in microfinance : do micro-savings attenuate trade-offs?

Volume 16 Number 3
  • ISSN : 1811-5187


A long-standing issue in the microfinance literature is the trade-off between the seemingly dichotomous objectives of microfinance institutions (MFIs), namely financial sustainability and social outreach. In our research, we argue that MFIs which offer savings products may provide special insight into the trade-off. Specifically, we investigate whether micro-savings attenuate the trade-off between financial sustainability and the depth and breadth of outreach. We specify and estimate an econometric model using data from 1,233 MFIs in 79 countries for the period 2000-2012, with a group of MFIs which takes micro-saving deposits and a control group that does not. We measure micro-savings by using the number of net savers, total deposits and the number of deposit accounts per staff member. We uncover new results which suggest that MFIs which take micro-savings can achieve financial viability as well as social outreach, unlike their counterparts in the control group of MFIs where the trade-off persists. We thus conclude that micro-savings help to attenuate the trade-off between financial sustainability and social outreach.

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