The impact of COVID-19 on the efficiency of microfinance institutions

This study investigates the effect of the COVID-19-induced decline in economic activities on the financial and social efficiency of microfinance institutions (MFIs). We find that the pandemic-induced impact decreases the financial efficiency of MFIs; however, the social efficiency of MFIs is increased under the impact of COVID-19. To explore potential channels through which efficiency is influenced by the COVID-19 outbreak, we examine the supply and demand side of MFIs' funding. We find that the lending rate mediates the relationship between the impact of COVID-19 and MFI efficiency, whereas the mediating role of the funding rate is negligible.

Automated summary

This study examines the impact of the COVID-19 pandemic on the financial and social efficiency of microfinance institutions (MFIs). It was found that while the pandemic led to a decrease in financial efficiency, it actually increased social efficiency of MFIs. The study also revealed that the lending rate plays a mediating role in the relationship between the impact of COVID-19 and MFI efficiency, while the funding rate has negligible influence.