Microbanks: Ownership, Performance, and Social Tradeoffs - A Global Analysis
This paper examines whether non-governmental organizations (NGOs) and shareholder firms (SHFs) differ in delivering social benefit to their clients. It attempts to find if a trade-off exists between different dimensions of social benefits, and whether they can predict ownership type. Basing the comparison on Schreiners framework for discussion of social benefits of microfinance, the study tests for the predicted difference between SHFs and NGOs. It uses a self-constructed data set with rating information from 132 NGOs and 68 SHFs in 53 countries to carry out the statistical tests. Findings include:
- SHFs and NGOs are more similar than different;
- SHFs benefit in scale and scope does not seem related to ownership; instead, it relates to legal constraints that impede NGOs from mobilizing savings;
- There is no trade-off among outreach variables;
- Return on assets is higher in NGOs.
Finally, ownership does not influence the performance of microfinance organizations. The paper states that adopting legal frameworks that allow best performing NGOs to mobilize savings and compete with SHFs in scale and scope is a better alternative to imposing costly transformation processes on NGOs.
