Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most microbanks. Profitability, though, is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy. The authors examine why this promise remains unmet for most institutions. Using a data set with unusually high quality financial information on 124 institutions in 49 countries, they explore the patterns of profitability, loan repayment, and cost reduction. The authors find that institutional design and orientation matter substantially. Lenders that do not use group-based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially. For these individual-based lenders, one key to achieving profitability is investing more heavily in staff costs-a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost.

Microfinance institutions (MFIs) provide a public good: they provide income-creating financial services to un-bankable people. If MFIs create and deepen markets where none existed before, there may be a case for public support. While subsidies are generally not favorably seen in financial sector development, being difficult to target and possibly distorting the local financial market, there may be situations where the net social benefits of micro-finance may exceed those of not doing anything and of alternative anti-poverty programs. Under such circumstances longer-term public support may be justifiable. This book is based on a study of forty-five MFIs carried out by ILO, in partnership with the Universities of Geneva and Cambridge. The application of factor analysis and cluster analysis shows that MFIs form clusters in terms of social and performance. Within each cluster there is one institution that is most efficient on both scores. Public support should ensure that the relative efficiency of MFIs is enhanced, it should not prod MFIs to modify their mission and position between poverty outreach and profitability.

Research on MFI performance is still in its infancy. MFIs are hybrid organizations with dual objectives. Performance studies in microfinance are therefore less straightforward compared to performance studies in traditional banking research. This book contains new MFI performance research by top scholars from across the globe.

Since the 1980s when the microfinance revolution began, much has been accomplished, but the field became more refined in the 1990s as a result of shifts in paradigms, strategies, and development practices. This volume addresses the three policy objectives that now occupy those who wish to use credit as a development tool: financial sustainability of microfinance institutions, outreach to the poor, and welfare impact. Inevitable tradeoffs exist among these objectives, and the book advances an analytical framework that assists students of and experts in microfinance to identify the tradeoffs and synergies at the institutional level and in the policy environment. The book features a wealth of empirical data and innovative analytical studies, and critically discusses the role of public support for microfinance institutions (MFIs) in light of the social costs and benefits generated by such financial systems. The book is organized into five parts. The first discusses the demand for and access to financial services by the poor, emphasizing that demand-oriented, pro-poor financial services are crucial in reaching the poor. The second is concerned with two of the criteria used to evaluate MFIs—outreach and financial sustainability. The third features innovative econometric studies seeking to evaluate the impact of MFIs at the household level. The fourth looks at the role of both public- and private-sector institutions in developing sustainable financial systems. And the fifth summarizes implications for policy and research. Given the lack of sound, empirical literature on microfinance, this volume is sure to advance knowledge and research methodology in the field.

As the global economy continues to evolve, the idea of sustainability has become a prevalent area of concentration. Businesses are searching for more environmentally and socially conscious practices as the market distances itself from the industrial age. Implementing sustainable initiatives starts with entrepreneurs, as these individuals are the foundation for creating and building profitable societies. Understanding the practice of sustainable entrepreneurship is pivotal in predicting future trends in business and the economy. Building an Entrepreneurial and Sustainable Society provides emerging research exploring the theoretical and practical aspects of sustainability within entrepreneurship and its applications in modern socioeconomics. Featuring coverage on a broad range of topics such as public policies, internationalization, and social innovation, this book is ideally designed for entrepreneurs, business specialists, professionals, researchers, managers, economists, educators, scholars, and students seeking current research on the evolution of sustainable entrepreneurship and its contextual factors.

The purpose of the 'Microfinance Handbook' is to bring together in a single source guiding principles and tools that will promote sustainable microfinance and create viable institutions.