A causality approach in the analysis of the trade-off between financial sustainability and outreach

This study reviews the causality between financial sustainability and depth of outreach for microfinance institutions in six regions. We performed a panel unit root analysis, revealing the data's stationarity both individually and regionally. The Granger causality analysis showed that Outreach, adjusted for the poorest 20%, causes financial sustainability in South Asia and Latin America. The research also proved bidirectional causality between Outreach and financial sustainability in East Asia and the Pacific. Our results imply an improvement in the model specification when analyzing the trade-off between financial sustainability and outreach in MFIs of those regions, which is useful for forecasting purposes.