The ‘Yin and Yang’ of Microfinance: SADC Evidence

Abstract

This study challenges the prevailing notion of microfinance commercialization and financial sustainability as complementary to social missions, often depicted as the yin and yang, particularly in the context of Southern Africa's high poverty levels. Using robust panel methods on selected Southern African MFIs, the research finds no evidence supporting the yin and yang relationship but highlights the importance of MFI financing structures in serving the poor. Findings reveal widespread financial unsustainability due to cost inefficiency and high portfolio risk, with outreach depth varying by proxy. Donations remain crucial for reaching the poor until MFIs achieve financial sustainability. Emphasizing cost efficiency and default risk management is essential for MFI sustainability. Despite data limitations, the study underscores the need for comprehensive microfinance data aggregation in the region to support evidence-based poverty interventions.