Abstract:

This paper aims to analyze the statistically significance of microfinance institutions (MFI) and banks performances on economic development through a GMM panel analysis. Our main contributions to previous literature are twofold. Firstly, we consider greater variety of indicators to capture different aspects of the banks and MFI performance. Secondly, besides traditional channels transmission such as investment, human capital, we account for an important potential transmission channel which is consumption. We mainly find that despite their relatively small size, MFI performances contribute to economic development even when accounting for banks performances. Furthermore, our results suggest that by improving their social and financial performances, MFI increase investment and consumption. Especially, we show that women use their loan to consume not to invest. Finally, we also find that banks’ performances improve GDP per capita through investment, consumption and human capital.