This paper investigates the role of public expenditures and general government debt in microfinance performance. Our panel regression applied to the data of microfinance institutions (MFIs) in Latin America and the Caribbean confirms the high significance of public finance for the growth of MFIs, especially for the size of their total assets and for their yield on gross loan portfolio. Moreover, the results indicate that MFIs, operating in the country with higher growth of GDP, are characterized by higher rate of social efficiency. The positive influence on microfinance is besides public finance also associated with a growth of rural population or an economy openness of the given country.

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