The Role of Deposit Insurance in Microfinance Institutions: A Systematic Literature Review
DOI:
https://doi.org/10.24256/kharaj.v8i1.9501Keywords:
deposit insurance, microfinance institutions, moral hazard, depositor trust, financial stabilityAbstract
This study reviews how deposit insurance interacts with the operations, behavior, and stability of microfinance institutions (MFIs). Methods: A systematic literature review (SLR) was conducted using PRISMA-guided screening. Searches were run in five academic databases (Google Scholar, Web of Science, SpringerLink, Taylor & Francis Online, and ScienceDirect) using the string “deposit insurance” AND “microfinance,” producing 625 records. After removing duplicates and applying title/abstract and full-text screening, three studies met the final inclusion criteria and were synthesized. Results: The evidence shows three main patterns: (1) deposit guarantees can increase moral hazard in MFIs with weak governance (as seen in Indonesia’s rural banks), (2) depositor trust, often shaped by perceived safety, can reduce deposit volatility and panic withdrawals (as shown in Gabon), and (3) deposit insurance may shift higher-risk borrowers away from insured banks toward MFIs, changing where risk concentrates in the financial system. Implications: Deposit insurance policy should consider MFIs, not only commercial banks. If protection is extended to MFIs (fully or partly), it should be paired with stronger governance requirements, better supervision, and risk-based pricing to reduce moral hazard while supporting depositor confidence and financial inclusion
References
Aguilar, G., & Portilla, J. (2023). The nonlinearity of the relationship between competition and the dual performance of regulated microfinance institutions in Peru. SN Business & Economics, 3(7), 128.
Algeri, C., Forgione, A. F., & Mucciardi, M. (2021). Spatial dependence in small cooperative bank risk behavior and its effects on bank competitiveness and SMEs. Applied Stochastic Models in Business and Industry, 37(6), 1080–1096.
Barik, R., & Lenka, S. K. (2023). Does financial inclusion control corruption in upper-middle and lower-middle income countries? Asia-Pacific Journal of Regional Science, 7(1), 69–92.
Bento, A. (2024). Banking for the culture: Black-owned banks as cultural assets during the subprime lending boom. Social Science Research, 121, 103025.
Chen, X., Hu, X., & Ben, S. (2021). How do reputation, structure design and FinTech ecosystem affect the net cash inflow of P2P lending platforms? Evidence from China. Electronic Commerce Research, 21(4), 1055–1082.
Dewi, V. I., Effendi, N., Anwar, M., Nidar, S. R., Fitrijanti, T., & Tjandrasa, B. (2023). Do shadow banking depositors discipline the market? Australasian Accounting, Business and Finance Journal, 17(4).
Fianto, B. A., Aryo, B., Shah, S. A. A., Al Mustofa, M. U., Anisha, A. I. I. N., & Ruslan, R. A. H. M. (2025). The role of deposit insurance in supporting Islamic microfinance institutions: Insights from Indonesia. Journal of Islamic Monetary Economics and Finance, 11(1), 7–34.
Galletta, S., Mazzù, S., Naciti, V., & Vermiglio, C. (2021). Sustainable development and financial institutions: Do banks’ environmental policies influence customer deposits? Business Strategy and the Environment, 30(1), 643–656.
Hakimi, A., Boussaada, R., & Karmani, M. (2024). Financial inclusion and non-performing loans in MENA region: The moderating role of board characteristics. Applied Economics, 56(24), 2900–2914.
Hartarska, V., Nadolnyak, D., & Chen, R. (2025). Banking crises and the performance of microfinance institutions. Journal of International Financial Markets, Institutions and Money, 102, 102166.
He, Z., & Hu, Y. (2023). Banks and financial crises: Contributions of Ben Bernanke, Douglas Diamond, and Philip Dybvig. The Scandinavian Journal of Economics, 125(3), 553–583.
Hidayat, N., Anshari, M., & Setiawan, R. (2024). Digitalization and diversification strategies for effective bank liquidity management in emerging markets. Edelweiss Applied Science and Technology, 8(6), 559–571.
Hidajat, T. (2020). Rural banks fraud: A story from Indonesia. Journal of Financial Crime, 27(3), 933–943. https://doi.org/10.1108/JFC-01-2020-0010
Jeong, Y. (2025). Predicting the repayment decisions of Korean vulnerable debtors: Evidence from an empirical study utilizing a stacking algorithm. Computational Economics, 1–21.
Keddad, B., & Obiang, J. R. (2024). Determinants of deposits volatility: The case of the microfinance sector in Gabon. Research in International Business and Finance, 67, 102108. https://doi.org/10.1016/j.ribaf.2023.102108
Kendo, S., & Brou, J. C. (2025). Market concentration, funding models, and financial stability in developing economies: A comparative analysis using One-Step GMM and Panel Quantile GMM. Applied Economics, 1–21.
Miah, M. D., & Suzuki, Y. (2020). Murabaha syndrome of Islamic banks: A paradox or product of the system? Journal of Islamic Accounting and Business Research, 11(7), 1363–1378. https://doi.org/10.1108/JIABR-05-2018-0067
Mwakalila, E., & Muba, S. (2025). The role of financial inclusion in reducing income inequality and poverty in Africa: A macro-level analysis. Scientific African, e02811.
Ngatno, N., & Apriatni, E. P. (2020). Moderation effects of organisational environment on the relationship between capital structure and financial performance of Central Java rural banks, Indonesia. (Conference paper / institutional publication — no journal title provided).
Nguyen, L. Q. T., Matousek, R., & Muradoglu, G. (2024). Bank capital, liquidity creation and the moderating role of bank culture: An investigation using a machine learning approach. Journal of Financial Stability, 72, 101265
Downloads
Published
How to Cite
Issue
Section
Citation Check
License
Copyright (c) 2026 Suhardiono, Hermanto Siregar
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. In line with the license, authors are allowed to share and adapt the material. In addition, the material must be given appropriate credit, provided with a link to the license, and indicated if changes were made. If authors remix, transform or build upon the material, authors must distribute their contributions under the same license as the original.
