Abstract

RAMIREZ ROCHA, Adriana; CERVANTES ZEPEDA, Mauricio  and  BERNAL PONCE, Luis Arturo. Mediation effect of interest rates on MFIs’ financial performance. Contad. Adm [online]. 2019, vol.64, n.3, e117.  Epub Aug 20, 2020. ISSN 0186-1042.  https://doi.org/10.22201/fca.24488410e.2018.1750.

In this article, we analyze the way in which interest rates interact with financial performance in the MFI context. To that end, we use structural equation modeling, as it can measure both direct and indirect effects between variables. We found that interest rates are a significant mediator variable between finan-cial performance and environment (corruption, the rule of law and government inefficiency), MFI size, and operating expense. The originality of this work lies in the methodology used. Although previous stu-dies analyze the effect of interest rates on the financial performance of MFIs, our methodology captures the mediation effect of this variable. Finally, we state that interest rates play an essential role in the pover-ty-alleviating mission of MFIs, such that they are a significant indirect driver of financial performance.

Keywords : G21; P36; C38; Micro finance institutions; Welfare and poverty; Factor models.

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