Impact of Geographical Diversification on Credit Risk of Microfinance Organizations in Armenia

HSE Economic Journal Pub Date : 2023-01-01 DOI:10.17323/1813-8691-2023-27-1-103-121

A. Mkhitaryan

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Abstract

This paper analyzes the existence of relationship between credit risk and the geographical diversification of financial institutions, originating from emerging countries. Due to economic unstable situation in the world caused by Covid-19, credit portfolios of banks and MFIs caused negatively which in some situations can lead to default. In the current situation, it became necessary to discover new approaches to credit risk management and new researches to be done. For this purpose, financial indicators of MFIs operating in Armenia were evaluated and Pearson analysis of MFIs data, risks & profitability efficiency calculation was made to take out impact of diversification of MFIs on credit risk reduction. Both international literature and practical data of MFIs operating in Armenia were identified. Another research was made for taking out the number of branches and credit risk correlation. Our findings show that geographic diversification is statistically significant with the expansion of gross loans. In contrast, empirical results suggest that the geographical diversification of MFIs does not have a significant correlation with the size of the credit risk reserve, which means that the representation of MFIs in different regions in the form of branches will not always lead to credit risk reduction, and in some cases may lead to operational risks and additional costs. We adopt cost funding and assets size variables impact assessment evaluation through instrumental variables method. Our results confirm the endogenous nature of those variables with risk level of MFIs. © 2023 Publishing House of the Higher School of Economics. All rights reserved.

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地理多样化对亚美尼亚小额信贷组织信贷风险的影响

本文分析了信用风险与新兴国家金融机构地域多元化之间存在的关系。由于新冠肺炎疫情导致全球经济不稳定，银行和小额信贷机构的信贷组合产生了负面影响，在某些情况下可能导致违约。在当前形势下，有必要探索新的信用风险管理方法，开展新的研究。为此，对在亚美尼亚经营的小额信贷机构的财务指标进行评价，并对小额信贷机构数据进行Pearson分析、风险和盈利效率计算，以排除小额信贷机构多元化对降低信贷风险的影响。确定了在亚美尼亚经营的小额信贷机构的国际文献和实际数据。另一项研究是将分行数量与信用风险的相关性去掉。我们的研究结果表明，随着贷款总额的扩大，地理多元化在统计上显着。相反，实证结果表明，小额信贷机构的地域多元化与信贷风险准备金的规模没有显著的相关性，这意味着小额信贷机构以分支机构的形式在不同地区的代表并不总是导致信贷风险的降低，在某些情况下可能会导致操作风险和额外的成本。采用工具变量法对成本、资金和资产规模变量进行影响评价。我们的研究结果证实了这些变量与小额信贷机构风险水平的内生性质。©2023高等经济学院出版社。版权所有。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

HSE Economic Journal Economics, Econometrics and Finance-Economics, Econometrics and Finance (all)

CiteScore

1.10

自引率

0.00%

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期刊介绍： The HSE Economic Journal publishes refereed papers both in Russian and English. It has perceived better understanding of the market economy, the Russian one in particular, since being established in 1997. It disseminated new and diverse ideas on economic theory and practice, economic modeling, applied mathematical and statistical methods. Its Editorial Board and Council consist of prominent Russian and foreign researchers whose activity has fostered integration of the world scientific community. The target audience comprises researches, university professors and graduate students. Submitted papers should match JEL classification and can cover country specific or international economic issues, in various areas, such as micro- and macroeconomics, econometrics, economic policy, labor markets, social policy. Apart from supporting high quality economic research and academic discussion the Editorial Board sees its mission in searching for the new authors with original ideas. The journal follows international reviewing practices – at present submitted papers are subject to single blind review of two reviewers. The journal stands for meeting the highest standards of publication ethics.