TITLE:
Factors Influencing Loan Portfolio Quality of Microfinance Institutions in Haiti
AUTHORS:
Rocheny Sifrain
KEYWORDS:
Loan Portfolio Quality, Ordinary Least Square (OLS), Microfinance Institutions (MFIs), Haiti
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.11 No.1,
March
4,
2022
ABSTRACT: This paper examines factors affecting loan portfolio quality of MFIs in
Haiti, over the period of October 2016 to September 2021, using a sample of
four non-cooperative MFIs (MFI1, MFI2, MFI3 and MFI4) offering individual
loans. This study applies the Ordinary Least Squares (OLS) regression to
estimate the effects of two macroeconomic variables (exchange rate and
inflation rate) and two micro-variables (loan amount per borrower and gross
loan portfolio) on loan portfolio quality, measured by portfolio at risk over
30 days (PAR30). One statistical model has been specified for all MFIs and one
statistical model has been specified for each MFI individually. Overall, the
results show that portfolio at risk of MFIs can increase with the depreciation
of local currency and as the inflation rises; but the results are not
statistically significant. However, distinctively, the findings of MFI1 and
MFI3 indicate a positive and statistically significant association with the
exchange rate, while the output of MFI4 suggests a negative and insignificant
relationship with the exchange rate. Only the result of MFI2 indicates a
negative and insignificant relationship between the loan portfolio quality and
the inflation rate. On the other hand, the growth of the loan portfolio affects
adversely and significantly the loan portfolio at risk of MFIs globally and
individually, except MFI3 that indicates a negative and insignificant association
with the gross loan portfolio. Among the four MFIs, only the finding of MFI4
shows that the loan portfolio quality would significantly improve as the amount
disbursed per borrower increases. In contrast, for the rest of MFIs, as the
loan amount increases, the PAR30 would rise. Some implications can be drawn in
light of these findings. Authorities should create a promising macroeconomic
environment that would help MFIs to limit their credit risk. Moreover, MFIs
should reinforce their credit analysis, collection procedures and practices, in
order to ensure their loan portfolio growth, without compromising its quality.