What is it about?
The study answers the question about whether it is better to concentrate on one stream of income or expand the income sources of micro-banks (i.e., microfinance institutions). Given that governments (e.g., Cambodia, Kenya) are restricting how much interest a micro-bank can charge on loan, it is important for these institutions to expand their revenues to include investment income, fees and commissions. This study finds that it is indeed beneficial to expand revenue sources than to concentrate on interest income.
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Why is it important?
The study is important when it comes to the sustainability of micro-banks since their business model is costly. The micro-banks provide financial services to poor people and the cost of doing that is huge due to the provision of smaller loans than in traditional commercial banks.
Read the Original
This page is a summary of: Should microfinance institutions diversify or focus? A global analysis, Research in International Business and Finance, December 2018, Elsevier, DOI: 10.1016/j.ribaf.2017.12.001.
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