DETERMINANTS OF PROFITABILITY IN MICROFINANCE INSTITUTIONS IN SUB-SAHARAN AFRICA

Abstract

The aim of this study was to investigate and present the most prominent determinants of pro tability of micro nance institutions (MFI) in Sub-Saharan Africa. Creating an empirical framework including variables concluded to be of protruding e ect to pro tability and adapting it to the micro nance eld, we are able to isolate the determinants which play the central role in this emerging market. The model is applied to a dataset of MFIs in Sub-Saharan Africa during the period 2005-2014, which result in estimations showing that MFI speci c variables, such as credit risk, cost management and size are important factors in explaining why some succeed while others fail. We nd some, yet sparse, convincing evidence of macroeconomic determinants signi cantly a ecting MFI pro tability, although we acknowledge our model may be limited in its ability to capture the complexity of the economic environment in Sub-Saharan Africa.