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Does the extent of branchless banking adoption enhance the social and financial performance of microfinance institutions?

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Version 2 2024-02-11, 05:04
Version 1 2024-02-04, 10:23
journal contribution
revised on 2024-02-11, 05:00 and posted on 2024-02-11, 05:04 authored by Toka S. Mohamed, Mohammed M. Elgammal

We examine the impact of the extent of branchless banking adoption on the social and financial performance of an international sample of microfinance institutions (MFIs). We find that increasing the number of branchless banking points of service in MFIs is associated with productivity enhancements and improved social outreach. However, this occurs at the expense of adverse credit risk and profitability outcomes. Our results are robust to alternative measures of social and financial performance and the use of multiple methodologies including generalized method of moments, two and three-stage least squares. By introducing a quadratic specification, we unveil a parabolic relationship between the extent of branchless banking adoption and MFIs’ credit risk and profitability, which indicates that positive profitability and risk outcomes can eventually be achieved in MFIs with extensive branchless banking networks. This presents an important contribution to explaining the variations in insight in extant literature. These findings are relevant to policy makers as they indicate that investments in branchless banking present promising outcomes by encouraging financial inclusion, enhancing productivity and efficiency, and improving long-term profitability and repayment rates among MFIs. However, the initial adversity to profitability and credit risk may be a sufficient deterrent from BB investments for financially-oriented MFIs.

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Published in: Applied Economics
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Open Access funding provided by the Qatar National Library.



  • English



Publication Year

  • 2023

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This Item is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Institution affiliated with

  • Qatar University
  • College of Business and Economics - QU
  • Center for Entrepreneurship and Organizational Excellence - CBE
  • Georgetown University in Qatar

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