This paper identifies how loan portfolio characteristics impact the financial performance and sustainability of Moroccan microfinance institutions (MFIs). Using the Mix Market dataset, fixed and random panel regression models were adopted to analyze six Moroccan MFIs between 2003 and 2018. These models analyze the impact of loan portfolio size, type, risk, return, management effectiveness, write-offs, and recoveries variables on MFIs’ return on asset (ROA), return on equity (ROE), and operational self-sufficiency (OSS). As a set of proxy variables is used to measure each loan portfolio characteristic, empirical findings indicate that the nature of the relationships between these variables and the dependent variables varies. Findings indicate that MFIs’ profitability and sustainability are positively impacted by many variables that include the number of outstanding loans, gross loan portfolio for enterprise financing, and portfolio at risk 90. Results also reveal that the dependent variables are negatively impacted by variables, which include write-offs, the number of borrowers per staff member, and the number of loans per loan officer.

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Keywords

Microfinance institutions, Panel Regression, Loan Portfolio, Morocco