Title: Transparency and microfinance institutions' risk in Sub-Saharan Africa

Authors: Haileslasie Tadele; Helen Roberts; Rosalind H. Whiting

Addresses: Department of Accountancy and Finance, University of Otago, P.O. Box 56, Dunedin, 9054, New Zealand ' Department of Accountancy and Finance, University of Otago, P.O. Box 56, Dunedin, 9054, New Zealand ' Department of Accountancy and Finance, University of Otago, P.O. Box 56, Dunedin, 9054, New Zealand

Abstract: Using a sample of 151 MFIs from 21 countries over the 2005-2014 period, we examine the impact of transparency on MFIs' risk in Sub-Saharan Africa (SSA). We use a three-stage least squares method to address the issue of reverse causality between transparency and risk. Our results indicate that SSA MFIs have low levels of failure risk and operate in a moderate business disclosure environment. We find that higher MFI transparency reduces Not-for-profit MFIs (NFP MFIs') financial and insolvency risk. However, greater transparency is associated with higher credit risk for both for-profit (FP) and NFP MFIs and increases FP MFIs' failure risk. Country-level business disclosure does not influence MFI risk. Overall, our results provide new empirical evidence identifying the difference between for-profit and not-for-profit MFIs' risk behaviour and highlight the impact of transparency on MFI risk.

Keywords: microfinance institution; MFI; risk; Sub-Saharan Africa; SSA; transparency.

DOI: 10.1504/IJCG.2018.091277

International Journal of Corporate Governance, 2018 Vol.9 No.2, pp.201 - 226

Received: 18 Apr 2017
Accepted: 04 Feb 2018

Published online: 19 Apr 2018 *

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