Ayi Gavriel Ayayi

What drives microfinance institution's financial sustainability

Microfinance promises to trim down poverty. To achieve this noble objective microfinance institutions (MFIs) have to become steady profitable because donor constancy is not a given. Thus important question is: what factors drive the financial sustainability of MFIs? Using data on 217 MFIs in 101 countries distributed by region and type of MFIs over the period of 1998-2006, we report three important findings. First, we show that a high quality credit portfolio, coupled with the application of sufficiently high interest rates that allow a reasonable profit and sound management are instrumental to the financial sustainability of MFIs. Second, we show that the percentage of women among the clientele has a weak statistically non-significant negative effect on financial sustainability of MFIs. Third, we find that the client outreach of microfinance programs and the age of MFIs have a positive but lesser impact on attainment of financial sustainability. The policy implication is that MFIs have to emulate profit-making banking practices by implementing a sound financial management and good managerial governance to assure their financial sustainability.

Credit Risk Assessment in the Microfinance Industry

This paper discusses credit risk assessment through conventional and specialized credit evaluation metrics. I find that low credit risk is a direct consequence of sound implementation of good governance practices and sustainable financial performance through sound qualitative and quantitative risk management tools. Furthermore, I find that the depth and breadth of outreach and write‐off are by some margin the two most important determinant indicators of a microfinance institutions’ (MFI’s) credit risk control. In addition, I demonstrate that there is no significant statistical difference in terms of risk management among the different types of MFIs. Results also suggest that constructive regulation to promote MFIs has a non‐negligible impact on the risk assessment of MFIs.

Cost implications of microfinance regulation: lessons from Ghana

ABSTRACT The paper examines the impact of the costs associated with regulation on Microfinance Institutions in Ghana. To achieve the paper objective, we use a unique set of field data from 25 Microfinance Institutions from different regions of Ghana and opinions gathered from the managers of the sampled MFIs. We find that regulation increases an array of doing business costs that MFIs tend to pass to their micro-clients by increasing the interest rates. Furthermore, we find that the costs of regulation have adverse effects on outreach: reduction in percent of female borrowers. These findings are corroborated by the comparison analysis we conducted on Ghanaian MFIs that report to the Mixmarket. Regulatory instruments need to be well designed to achieve their dual roles of providing sound financial services and protecting micro-clients without jeopardizing the outreach mission of the MFIs.

Towards a Cyberinfrastructure for Social Science Research Collaboration: The Service Science Approach

Research collaboration in a globalized world has become one of the most important challenges for higher-education today. Collaboration between researchers all over the world is still an intricate and difficult challenge, which is the motive for this study that aims at filling this gap in the field of social science research. Based on the review of the literature, we propose a conceptual framework for designing a cyberinfrastructure to promote the collaboration among researchers across institutions. We present an example to illustrate the application of the framework that supports international collaboration between a research laboratory in a developed country and its partners in developing countries. Future work and research directions are also suggested in order to apply and extend the framework at a broader scale.

Motivational Factors in International Nongovernmental Organizations in Vietnam

The paper studies motivation factors of employees working in eight international nongovernmental organizations in Vietnam. We find, using the six factor work extrinsic and intrinsic motivation scale (Tremblay et al. in Can J Behav Sci 41:213–226, 2009) based on the self-determination theory (Deci and Ryan in Intrinsic motivation and self-determination in human behavior. Plenum, New York, 1985), that employees are most influenced by intrinsic motivation. We also find that autonomous regulations have higher impact than controlled regulations. Additionally, we find that external regulation plays more important motivational role in these organizations than introjected regulation. Overall, these findings tend to provide insights for the managers of international nongovernmental organizations in Vietnam on how to attract and retain talents.

Regulation, Outreach, and Sustainability of Microfinance Institutions in Sub-Saharan Africa: A Multilevel Analysis

The paper examines the effect of regulation on microfinance institutions’ (MFIs) sustainability and outreach in Sub‐Saharan Africa (SSA). Using unbalanced panel data from 2002 to 2012 for 30 countries and a multilevel estimation technique, we find that regulation helps improves the sustainability and breadth of outreach but not the depth. We also find that MFIs that accept deposits have better sustainability but tend to serve the marginal poor. Finally, regulatory quality has a positive impact on outreach and sustainability. Overall, the paper casts new light on the contribution of regulation to the dual objectives of microfinance.

Recent Developments in Microfinance and Beyond

This paper surveys recent research on microfinance and suggests directions for future research. New empirical evidence has emerged, and new theoretical models have resolved some issues. The paper selectively examines recent findings, particularly theoretical and empirical works that deal with the financial and social goals that microcredit must fulfill to provide long-term sustainable poverty reduction. Finally, some issues for which new research is needed are identified.

The One Period Problem of a Monopoly Incentive Compatible Equity and Debt-linked Contracts

The paper studies what is the optimal financial vehicle that serves a monopoly best interest in nurturing his investees and at the same time can provide a socially optimal welfare. I demonstrate that it is the equity contract that serves the monopoly best interest because the profits it generates are higher than the profits derived from the collateral debt and convertible debt contract. In addition, I show that the equity contract is socially better than the debt-linked. I also show that neither equity nor debt-linked contracts are able to reveal the ability of the entrepreneur.