No.22 Acquisition of Microfinance Institutions by Commercial Investors: Evidence on Its Impacts on Outreach of the Cambodian Microfinance Institutions

Recent developments in the microfinance sector have attracted a large inflow of capital investment. At the same time, there has been an increasing number of cases of acquisition of　microfinance institutions (MFIs) by domestic and foreign private investors, especially commercial banks. This study investigates the current state of acquisition of local Cambodian MFIs and examines the impact of the recent acquisition cases on the lending behavior of local MFIs. The analysis employs unique data on Cambodian MFI lending at the MFI-district-pair level,　 and applies a robust difference-in-differences approach to estimate the impact of acquisition. The study finds that the acquisition cases have contributed to increases in the loan portfolios of MFIs and a shift in MFIs ’credit allocation from rural to urban areas after acquisition. Thus, changes in ownership and organizational structures through acquisition by commercial investors could more or less cause mission drift among MFIs. The results of the analysis may suggest that investment by impact investors should be facilitated to ensure the sustainability of social lending to the poor.

Keyword: Microfinance Institutions, Financial Inclusion, SDG Investment, Capital Inflow, Cambodia.