How Public Finance Contribute to the External Sources of Microfinance Institutions

This paper investigates whether the macroeconomic environment and banking sector influence the rising demand of the MFIs for external sources. This examination was conducted on a sample of data from MFIs operating in 21 selected countries in Asia, Latin America and the Caribbean for the period 2007-2012. Our results confirm that macroeconomic development has a significant impact on the external funding of MFIs in the individual countries. To be more precise, a positive impact is revealed for the indicators of unemployment, public debt and the corruption index. Conversely, the external sources are negatively associated with the tax burden and increasing competition from commercial banks.