The impact of demonetization on microfinance institutions

Wentao Wu, Zhilu Lin, Pejvak Oghazi*, Pankaj C. Patel

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

5 Citations (Scopus)


Microfinance institutions (MFIs) must balance financial and social goals. When these coopetitive goals are under threat, which goals do MFIs prefer? Based on the theory of myopic loss aversion, our study aims to assess the immediate effect of the 2016 demonetization in India on MFIs and their loan portfolio performance and on unintended social outcomes. Using the 2016 demonetization in India as a quasi-experiment, we find that MFIs had a lower 30-day and 90-day portfolio at risk (PAR) and implemented better client protection terms. In addition, demonetization had a small but positive effect on developing start-up enterprises and serving more clients below the poverty line. Last, we find that MFIs investing in female client education presented a lower PAR after demonetization. Overall, our study sheds light on the unintended consequences on MFIs as a result of the demonetization event, and it provides policy implications for MFIs.

Original languageEnglish
Peer-reviewed scientific journalJournal of Business Research
Pages (from-to)1-18
Number of pages18
Publication statusPublished - 12.2022
MoE publication typeA1 Journal article - refereed


  • 512 Business and Management
  • Demonetization
  • Loan performance
  • Microfinance
  • Portfolio at risk (PAR)
  • Social outcomes


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