In the context of agricultural lending in Cambodia, Dr Caballero-Montes assesses the extent to which microfinance institutions (MFIs) are able to pursue both financial and social objectives. The author contends that the provision of agricultural loans is a “forgotten measure” of social impact “since rural – and even more agricultural – businesses and individuals are typically more financially excluded and vulnerable.”
The MFIs in the study disbursed an average of 22 percent of their loan volumes to agriculture – a portion exceeded only lending for household activities, which comprises 26 percent. Data collected from 2010 to 2017 points to a positive relationship between financial performance – including return on assets and operational sustainability – and the percentage of agricultural loans in an MFI’s loan portfolio.
Dr Caballero-Montes concludes that, at least in the Cambodian microcredit market, there is no trade-off between profitability and social performance because MFIs that are more profitable invest more resources in outreach to farmers.
This is a summary of a paper by Tristan Caballero-Montes; published in Savings and Development; February 2023; 11 pages; available at https://savingsanddevelopment.scholasticahq.com/article/56673-the-relationship-between-financial-and-social-performances-in-microfinance-insights-from-the-provision-of-agricultural-loans-in-cambodia.
By Vaughn Rajah, Research Associate
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