Business Management Models of Microfinance Institutions (MFIs) in Africa

Abstract

In this study, the authors analyse the socioeconomic, political and geographic conditions that are conducive of cooperative microfinance initiatives in comparison with other organizational forms in Africa. They distinguish three types of institutions (MFIs) and business models: cooperatives/credit unions, non-profit or non-governmental (NGOs and commercial banks). To analyse the enabling environment for the three business models three types of factors are distinguished: macroeconomic policy, institutional, and geographical. Multinomial logistic regression is applied to investigate the impact of these external conditions. The authors use data on 1790 MFIs in selected African countries (MIX Market) and global socioeconomic data of these countries. Their findings reveal that irrespective geographic location, cooperatives feature in countries with civil law systems, low inflation rates and high levels of economic growth. Commercial MFIs (banks) feature particularly in the countries with common law legal systems. NGO type MFIs are associated with high inflation rates and low levels of economic growth.