Banking on Women: An Empirical Study of Microfinance Institutions and the Influence of Gender on Performance

Abstract

This paper seeks to expand the scope of microfinance research to encompass the critically important issue of the impact of gender, which has been largely omitted from microfinance institution performance studies. Using a large and globallyrepresentative panel dataset from MIX Market over the period from 1995 to 2015, I provide thorough empirical analysis of the focus on women in the microfinance industry and its relationship with performance measured along various dimensions. This study employs several panel data regression models – OLS, fixed effects, random effects, and Hausman-Taylor – to ensure that results are robust to the choice of estimation method, and unobserved heterogeneity. Results reveal that a higher percentage of female clients is significantly related to performance. With respect to financial performance, I find that greater proportion of female clients is significantly related to increased profit margin and rate of return on assets. With respect to social performance, more female clients are associated with greater breadth of outreach in terms of total clients served, as well as greater depth of outreach, in terms of smaller loan sizes. The findings here suggest that gender disparities do exist in microfinance performance. The conclusion that serving female clients positively influences MFI performance measures is important in directing the development of the financial services sector and should matter deeply to stakeholders across the industry.