Incidence of microeconomic efficiency on the profitability of savings and credit cooperatives in segment 1 of Ecuador

Abstract

The aim of this study is to analyze the determinants that influence the profitability of Savings and Credit Cooperatives in segment 1 of Ecuador, during the period 2018-2022, mainly those related to the management and administration of financial institutions. Using the ordinary least squares method, a multiple regression econometric model was developed with profitability measured through the ROA and ROE indicators as the dependent variable and an index that groups three microeconomic efficiency indicators as the variable of interest and three control variables. Among the relevant results, it can be noted that the variables that have statistical significance are microeconomic efficiency with both ROA and ROE, and delinquency only in the case of ROE. For each percentage point change in the efficiency index, profitability measured by equity (ROE) changes by 0.0749 and by 0.0122 in ROA. Changes in delinquency inversely affect profitability by 0.861. It is worth mentioning that the knowledge of these determinants will be useful for the financial institutions themselves and other interested parties such as regulatory bodies, microfinance networks, and funders to formulate policies and projects aimed at improving the profitability of the microfinance sector in Ecuador.