TY - JOUR
T1 - An Analysis of Profitability, Capital Structure, and Credit Risk in the Peruvian Microfinance Sector
AU - Matos Bautista, Jordy Jhonathan
AU - Martinez-Luna, Alexandra Betty
AU - Ninanya Cornejo, Gustavo Hugo
AU - Santillan Zapata, Nivardo Alonzo
AU - Deza Quispe, Jimmy Alberth
N1 - Publisher Copyright:
© 2022 by the authors; licensee Online Academic Press, USA.
PY - 2022/3
Y1 - 2022/3
N2 - The Peruvian Cajas Municipales de Ahorro y Crédito (CMAC) have been integrating many people into the financial system since 1980. Their microfinance operations target both people and businesses. Hence, CMAC provides financial services to people and companies that many conventional banks might reject. Although CMAC firms have increased their operations, their profits and market share have fallen. Therefore, this study employed a PLS-SEM model to analyze the causes of this phenomenon. Following previous studies, the current analysis studied both internal and external factors. The latent variable capital structure was used to express the internal factors and indicators, while the latent variable credit risk represented the external factors. The dependent variable was profitability, and its indicators were ROA and ROE. The results of the analysis indicated that capital structure and credit risk were negatively related to profitability. Additional testing revealed that the principal causes might be attached to an increment of provisions. Moreover, CMAC managers do not accept private investors for fear of losing their power. Therefore, the recommendation is that CMAC managers improve their credit policies and share their power decisions to attract more investors.
AB - The Peruvian Cajas Municipales de Ahorro y Crédito (CMAC) have been integrating many people into the financial system since 1980. Their microfinance operations target both people and businesses. Hence, CMAC provides financial services to people and companies that many conventional banks might reject. Although CMAC firms have increased their operations, their profits and market share have fallen. Therefore, this study employed a PLS-SEM model to analyze the causes of this phenomenon. Following previous studies, the current analysis studied both internal and external factors. The latent variable capital structure was used to express the internal factors and indicators, while the latent variable credit risk represented the external factors. The dependent variable was profitability, and its indicators were ROA and ROE. The results of the analysis indicated that capital structure and credit risk were negatively related to profitability. Additional testing revealed that the principal causes might be attached to an increment of provisions. Moreover, CMAC managers do not accept private investors for fear of losing their power. Therefore, the recommendation is that CMAC managers improve their credit policies and share their power decisions to attract more investors.
KW - CMAC
KW - Capital structure
KW - Credit risk
KW - Profitability
KW - Structural equation
UR - http://www.scopus.com/inward/record.url?scp=85134845908&partnerID=8YFLogxK
U2 - 10.33094/ijaefa.v13i1.608
DO - 10.33094/ijaefa.v13i1.608
M3 - Original Article
AN - SCOPUS:85134845908
SN - 2577-767X
VL - 13
SP - 20
EP - 28
JO - International Journal of Applied Economics, Finance and Accounting
JF - International Journal of Applied Economics, Finance and Accounting
IS - 1
ER -