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Top2. Conceptual Framework
Microfinance differs from conventional finance as it provides financial services to low-income population1 (CGAP, 2006). The success of microfinance varies considerably across countries (Morduch & Haley, 2002). Differences are mostly explained by the importance of the external contextual environment on institutional sustainability and efficiency (Ahlin, Lin, & Maio, 2011; Crabb, 2008; Cull & Morduch, 2007; Hartarska & Nadolnyak, 2007; Vanroose & D’Espallier, 2009).
Another stream of literature shows that institutional type of microcredit providers influences the differences in outreach and sustainability of the MFIs (Hartarska, Mersland, Nadolnyak, & Parmeter, 2013; Mersland & Strøm, 2008). The social and financial performance naturally result from the mission and vision of the MFIs.
We use a similar approach to Tchakoute-Tchuigoua (2010), who has explained the choice of MFI’s organizational type (ownership) by their geographical location. An effort to relate the organizational type of MFIs with the environment was not further researched in microfinance literature. To fill this gap, we estimate an influence of external environment, measured from various perspectives, on MFI’s organizational models.
Our research question is: Which factors (macroeconomic, institutional and geographical) are conducive for the three distinguished business models of MFIs in Sub Sahara Africa?
The description of the variables used is given in the following sections.