Management of microfinance institutions: Do subsidies matter?

Authors

  • Marek Hudon

    Corresponding author
    1. CERMi, Université libre de Bruxelles, Belgium and Burgundy School of Business, France
    • Centre for European Research in Microfinance (CERMi), SBS-EM, Université libre de Bruxelles (ULB), Avenue Franklin Roosevelt 21, 1050 Bruxelles, Belgium.
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Abstract

It is estimated that donors commit between US$ 800 million and US$ 1 billion to microfinance per year. This paper analyses the management of microfinance institutions (MFIs) and its relationship with donors' subsidies. The results show that the level of subsidies granted per year is related to the management quality but not the subsidies divided by the gross loan portfolio or the total equity. Well-managed MFIs are larger and regulated organisations but not significantly older. The organisational structure or the experience of the MFI however does not play a role in determining its financial effectiveness, except for cooperatives. Copyright © 2009 John Wiley & Sons, Ltd.

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