The Impact of Peer-to-Peer Lending on Operational Self-Sufficiency of Microfinance Institutions

Abstract

In the growing financial development environment and with the advent of various technology platforms, microfinance institutions (MFIs) have been facing various challenges. In particular, Peer-to-Peer (P2P) lending is one of the powerful platforms creating competitive pressure for microfinance institutions. The study has been conducted to clarify the impact of P2P lending on the operational self-sufficiency (OSS) of MFIs. The study was based on a sample of MFIs spanning 123 countries and territories with data collected from Mixmarket, World Development Indicators, and Cambridge Alternative Finance Benchmarks during the period 2011- 2019. This research uses the Generalized Least Square (GLS) method to estimate the model. Research results indicate that P2P lending has a significant negative impact on the OSS of MFIs. In addition, the research results also represent that loan growth, the proportion of female lenders, operating time and inflation rate have a positive influence on the OSS of MFIs. Otherwise, the non-performing loan ratio has a significant negative impact on the OSS of these institutions.