Regulatory Framework and Microfinance Institutions’ Performance within the West African Monetary Union
Date
2021-05-06
Authors
Hadizatou, Ali
Journal Title
Journal ISSN
Volume Title
Publisher
AERC
Abstract
This study assessed the performance of microfinance institutions (MFIs) in the
West African Monetary Union (UMOA) following a change in regulations and
prudential ratios (capital and liquidity). Results of econometric estimations based
on data covering the period 2002-2015 showed that the application of the 2007
law did not bring any benefit to the performance of the MFIs. This is because
the opportunity cost of holding liquidity when the new law was adopted and the
period during which it was effectively enacted was high enough to have a negative
effect on return on assets, on the return on equity and on the proportion of loans
per capita. During the same period, the minimum capital requirements were of
great importance for financial performance, since they led to an accumulation of
funds for investment purposes. The relationship between minimum capital and
performance remained positive even when different performance indicators and
estimation methods were used. However, the effect of liquidity and regulation
varied with the estimation method used.
Description
Keywords
Microfinance, , UMOA (WAMU), , Performance, , Regulation, , Capital, , Liquidity