About This Project
Microfinance institutions (MFIs) provide loans to the poor who are without collateral. Transparency of financial activity is central to the support of the vital outreach activity of MFIs. I plan to investigate the impact on transparency of whether MFIs are for-profit or non-profit. It is crucial for regulators to understand how MFI transparency is shaped by accountability to shareholders and depositors, while controlling for social trust, national governance and MFI performance.
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What is the context of this research?
Microfinance is one of the most important vehicles for alleviating poverty in the world. Can microfinance accomplish the social goal of providing financing to the bottom of the pyramid while also having a sustainable business model? Since the financial crisis of 2008, the microfinance industry has seen setbacks, as well as opportunities. There has been a steady rise in the presence of for-profit microfinance institutions (MFIs) in addition to traditional non-profit institutions. Revenue growth and profitability have slowed with a concomitant rise in portfolio-at-risk. But despite these issues, the microfinance industry continues to grow, perhaps outpacing the institutional capabilities in place in many countries.
What is the significance of this project?
In order for all stakeholders to have a voice and participate in the shaping of the microfinance industry, it is essential that the industry, and more specifically individual MFIs maintain financial transparency. Transparency and knowing with accuracy the fulfilling of commercial and social objectives is essential for any discussion moving forward of what sort of institutional structures and governance structures work best for MFIs to help the poor. Yet such clarity of disclosure varies widely across MFIs and across nations.
What are the goals of the project?
There are many questions: Are for-profit MFIs more or less transparent than non-profit MFIs? Do MFIs set levels of transparency in response to quality of performance? Or quality of portfolios? Or does transparency improve performance and portfolios? Or is it used as a substitute for a void in oversight and governance at national levels? Do MFIs disclose more in response to satisfying shareholders or depositors or other stakeholders? Is there a connection between MFI transparency and meeting critical social objectives?
Goals include collecting data from thousands of MFI/years on a wide variety of factors including performance, loan portfolio quality, and social outreach. Empirical tests will be devised and undertaken. Results analyzed and discussed in a formal research paper.
As my salary is 9-months at the University of Akron, I seek additional funding to pursue socially meaningful research during the North American summer months. Funds will pay for research assistant to help with data collection and organization during the summer months. I do not receive a research assistant from my institution during the summer. Funds will also help disseminate the eventual results by being applied to fees for journal submissions and travel to conferences. In the field of finance, quality journals with the most impact normally charge substantial fees for submissions to peer review, as much as $750. Travel to collaborative conferences can be vital for both improving and disseminating a project, especially if a conference focuses on international business or more specifically on microfinance. Conferences provide peer review and peer discussion at intermediate stages that can be vital to the success of an academic inquiry.
Meet the Team
John W. Goodell
I am a faculty member in the Department of Finance at the University of Akron. My research interests focus particularly on the impact on financial systems of national culture, social trust and institutions. In 2011 I received the Stockholm School of Economics/Women in the Academy of International Business Award for Increased Gender Awareness in International Business Research. My research has been highlighted in numerous media outlets including the Washington Post, PBS NewsHour, and Bloomberg Businessweek. Since completing his PhD in 2008, I have co-authored over thirty-five journal articles and book chapters, including articles in the Journal of Banking and Finance, International Business Review, and the Journal of Business Ethics. I am currently working on a book about the impact of national culture on finance for the University of Chicago Press.
My previous research on microfinance includes a published study showing that microfinance institutions target women borrowers in part to compensate for a lack of social trust. This research provided empirical support for a long-held central tenet of microfinance.
Nothing posted yet.
This study proposes to use the transparency scores of MIX Market (mixmarket.org). I plan to use data on hundreds of MFIs from 73 countries (thousands of MFI/year observations) for the period 2003–2015. Controlling for relevant variables, I hope to investigate the determinants of MFI financial transparency, considering the impact of MFI performance and stakeholders, and societal characteristics.
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