|M.Sc Student||Tsytrinbaum Leonid|
|Subject||Determinants of Performance in the Microfinance Industry:|
The Role of Culture
|Department||Department of Industrial Engineering and Management||Supervisors||Professor Rann Smorodinsky|
|Dr. Ronny Manos|
|Full Thesis text|
Microfinance (MF) has been gaining an increasing interest from academia in recent years. Favourite research topics include performance related issues, and in particular two key aspects of performance: financial sustainability and attainment of social goals. From practitioners' point of view, attention has turned from a focus on microcredit to the provision of a wide range of financial services including savings, insurance, and mortgage and remittances services. Another recent development is the change in the makeup of the industry and in particular the involvement of private investors and the commercialization of the microfinance industry. These phenomena have led to a growing interest by researchers, practitioners and investors in the social and financial performance of microfinance institutions. Answers are sought to questions such as what factors determine performance and what are the interrelationships between social and financial performance. To date, however, no conclusions have been reached on these questions.
This thesis explores a new avenue for understanding the determinants of performance in the microfinance industry and the interactions between social and financial performance. In particular, the thesis puts forward and investigates the proposition that national culture is important in shaping financial and social performance and interactions thereof.
To explore these questions a panel dataset of 852 microfinance institutions (MFIs) from 30 countries over the period 2000 to 2010 is employed. Using panel regression techniques it is found that culture is a significant determinant of MFI financial and social performance. Moreover, the influence of culture on MFI financial and social performance varies by cultural values and beliefs, as captured by nine cultural dimensions. These findings indicate that MF practitioners should acknowledge and account for the effects of distinctive national cultural preferences. In addition, future MF research should consider culture in its attempt to explain MFI performance levels worldwide.