Analysing the Financial Performance of Microfinance Mutual Funds

Microfinance institutions that were originally non-governmental organizations-managed institutions are turning into profit institutions that require external financial resources in addition to retained profits and deposit collection. Microfinance mutual funds could play an important role in funding microfinance institutions and microentrepreneurs, whether they can generate wealth for their investors. Therefore, the objective of this study is threefold. First it analyses the financial performance of microfinance mutual funds investing in global and global emerging geographical markets. Second, it examines the effect of the COVID-19 pandemic crisis on fund financial performance. Third, it studies the effect of ethical screening for managing microfinance fund portfolios on their financial performance. We have information on 98 microfinance mutual funds from March 2003 to December 2021. We adopt a multi-index model for this sample. Our results indicate that some microfinance mutual funds can beat the market benchmark, achieving better financial performance in non-crisis than in crisis periods. The adoption of ethical criteria in portfolio management reduces funds’ financial performance. However, during the COVID-19 pandemic, global ethical microfinance mutual funds perform better than their conventional counterparts and ethical microfinance mutual funds investing in global emerging markets.