scholarly journals TARGETING THE POOR VERSUS FINANCIAL SUSTAINABILITY AND EXTERNAL FUNDING: EVIDENCE OF MICROFINANCE INSTITUTIONS IN GHANA

2012 ◽  
Vol 17 (03) ◽  
pp. 1250016 ◽  
Author(s):  
SAMUEL KOBINA ANNIM
Keyword(s):  
Regression Analysis ◽  
Development Strategies ◽  
Financial Resources ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
External Funding ◽  
The Poor ◽  
Self Sufficiency ◽  
Using Data ◽  
Type Of Institution

This study tests the hypotheses that: (i) formal microfinance institutions (MFIs) using their own mobilized financial resources (based on owners' equity, commercial lending or deposits) for on-lending reach non-poor clients and (ii) concentrating on the achievement of financial sustainability causes an institution to target non-poor clients. Using data on 2,691 MFI clients and non-clients from Ghana, we revisit the microfinance argument of serving poorer clients and sustainability, and in addition examine the effect of the source of funds and type of institution on the financial and social objectives of MFIs. Following the correction of endogeneity, our regression analysis shows that unlike financial self-sufficiency, MFIs that are only operationally self-sufficient reach poorer clients, and also, formal institutions dispensing their own funds target non-poor clients. The latter finding suggests the importance of complementary development strategies and a deliberate harmonization of microfinance interventions, irrespective of the source of funds.

scholarly journals Microfinance institutions’ operational self-sufficiency in sub-Saharan Africa: empirical evidence

2021 ◽  
Vol 6 (1) ◽  
Author(s):  
Laxmi Remer ◽  
Hanna Kattilakoski
Keyword(s):  
Empirical Evidence ◽  
Cost Management ◽  
Sub Saharan Africa ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Return On Assets ◽  
Industry Development ◽  
Management Measures ◽  
Self Sufficiency ◽  
Sub Saharan

AbstractThe topic of financial sustainability in microfinance institutions has become more important as an increasing number of Microfinance Institutions (MFIs) seek operational self-sufficiency, which translates into financial sustainability. This study aims to identify factors that drive operational self-sufficiency in microfinance institutions. To accomplish this, 416 MFIs in sub-Saharan Africa are studied and several drivers for operational self-sufficiency are empirically analyzed. Results indicate that these drivers are return on assets, and the ratios total expenses/assets and financial revenues/assets. The results imply that MFIs should encourage cost-management measures. They also reveal that there may not be a significant tradeoff in self-sufficiency and outreach. These findings will enable microfinance institutions worldwide to sharpen their institutional capabilities to achieve operational self-sufficiency and also provide policymakers with more focused tools to assist industry development.

scholarly journals Competition and microfinance institutions’ performance: evidence from India

2020 ◽  
Vol 5 (1) ◽  
Author(s):  
Hailu Abebe Wondirad
Keyword(s):  
Empirical Analysis ◽  
Significant Relationship ◽  
Competitive Market ◽  
Microfinance Institutions ◽  
Self Sufficiency ◽  
Using Data ◽  
The Relationship ◽  
The Empirical Analysis

Abstract This paper empirically examines whether competition (measured by using the new measure of competition, the Boone Indicator) moderates the relationship between Microfinance Institutions’ (MFIs) social and financial performances using data from 183 Indian MFIs over the period 2005–2014. The findings indicate that MFIs’ social and financial performances have a positive significant relationship. Moreover, the form of the relationship is both lead-lag and cotemporal. The Indian microfinance market was very competitive over the period 2005–2014. The empirical findings show that competition positively moderates the relationship between MFIs’ social and financial performances. More precisely, the empirical analysis provides evidence that the association between MFIs’ depth of outreach and operational self-sufficiency is conditional upon competition. These results suggest that in a competitive market, the more MFI deepen their depth of outreach, the higher contribution it has to their operational self-sufficiency.

Depth of Outreach and Financial Sustainability of Microfinance Institutions

2020 ◽  
pp. 204-218 ◽  
Author(s):  
Mohammad Zainuddin ◽  
Ida Md. Yasin ◽  
Masnun Mahi ◽  
Shabiha Akter
Keyword(s):  
Research Question ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Donor Funding ◽  
Trade Off ◽  
The Poor ◽  
Social Objective

Microfinance institutions tend to rely on donations and subsidies to achieve their social objective of outreach to the poor. Over the years, the industry has experienced tremendous growth, with donor funding pouring in. The question, however, arises whether microfinance firms can operate and continue to serve the poor clients on cost-covering basis without ongoing subsidies. There has been a growing tendency in the industry, which was traditionally a domain of not-for-profits, to embrace commercialization and pursue profitability to ensure self-sustainability. This chapter makes an empirical revisit to an inconclusive research question: Is there a trade-off between microfinance outreach and sustainability? Based on data for 1,232 microfinance firms from 43 countries, the study confirms the existence of trade-off between the two bottom lines of microfinance.

Does the Financial Self-sufficiency of Municipalities Affect Efficiency of the Museums which they Founded? (A Case Study from the Czech Republic)

2017 ◽  
Vol 15 (3) ◽  
pp. 479-494 ◽  
Author(s):  
Michal Plaček ◽  
František Ochrana ◽  
Milan Půček ◽  
Milan Křápek ◽  
David Špaček
Keyword(s):  
Regression Analysis ◽  
Data Envelopment Analysis ◽  
Fiscal Decentralization ◽  
Financial Data ◽  
Data Envelopment ◽  
The Czech Republic ◽  
Self Sufficiency ◽  
Using Data ◽  
The Impact

This paper analyzes and discusses the impact of fiscal decentralization on the efficiency of museums run by municipalities. It tests the hypothesis that municipalities with higher levels of income self-sufficiency can more efficiently manage museums than municipalities with lower levels of financial self-sufficiency. For our analysis, we used financial data for the years 2015 to analyze the efficiency of museums using data envelopment analysis (DEA). To test the hypothesis about the impact of financial self-sufficiency, we use regression analysis. The results obtained did not confirmed the hypothesis.

scholarly journals Financial Sustainability and Corporate Social Responsibility Under Mediating Effect of Operational Self-Sustainability

2020 ◽  
Vol 11 ◽  
Author(s):  
Rai Imtiaz Hussain ◽  
Shahid Bashir ◽  
Shahbaz Hussain
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Financial Performance ◽  
Mediating Effect ◽  
Financial Sustainability ◽  
Strong Positive Correlation ◽  
Microfinance Institutions ◽  
Self Sufficiency ◽  
Employee Attraction ◽  
Corporate Social

Operational and financial sustainability have, over time, remained as issues in the microfinance industry. The microfinance industry is struggling to gain self-sufficiency in Pakistan due to non-performing loans and operating costs. Simultaneously, deliberation on corporate social responsibility (CSR) is also considered in academic literature and organizational practices. However, studies on CSR and financial performance in the microfinance sector are scarce, especially in Pakistan. CSR will develop customer attraction and loyalty, employee attraction, motivation and commitment, MFIs' reputation and access to capital, and eventually build financial performance. Interviews were conducted with branch managers of microfinance institutions to test previous questionnaires. A self-administered survey was conducted to collect data from the managers of the microfinance banks operating in Punjab. Descriptive and inferential statistics were performed to answer research questions using Smart PLS. Most of the microfinance institutions believe in social responsibilities but lacks fund allocation and approval from higher management, and results are in line with prior studies. These empirical findings lead to the perception that CSR is not a barrier performance in microfinance banks as they have access to capital. The results indicated a strong positive correlation between CSR and the financial performance of the MFIs. CSR also positively correlates with customer retention, employees' motivation and attraction, and business reputation. CSR was associated with access to capital but was found to be weak. The research also narrated the limitation and practical implications of the study. The study also discusses further research directions.

scholarly journals IMPROVING FINANCIAL EDUCATION TO THE POOR AT THE BOTTOM-OF PYRAMID: THE ROLE OF SOCIAL FINANCE VIS A VIS FINANCIAL INSTITUTIONS

2016 ◽  
Vol 1 (1) ◽  
pp. 44
Author(s):  
Laily Dwi Arsyianti ◽  
Salina Kassim
Keyword(s):  
Financial Institutions ◽  
Financial Education ◽  
Financial Inclusion ◽  
Financial Resources ◽  
Microfinance Institutions ◽  
Operational Costs ◽  
The Poor ◽  
Bottom Of Pyramid ◽  
The Cost

This paper aims to explore the role of Islamic social finance and financial institutions in contributing towards improving financial inclusion through financial education among the poor. While there have been a lot of efforts undertaken by financial institutions, especially microfinance institutions, to achieve the financial inclusion agenda, the financial inclusion programs would normally require high operational costs which many financial institutions would consider them as not commercially viable. The costs thenare transferred back to the customers, resulting in the financing/ credit cost higher than commercial financial institutions. As a result, incidences of bankruptcyincrease when the cost of credit is higher. Thus, financial education is essential for average family in managing their day to day financial resources. While financial institutions keep busy with financial inclusion agenda and trying to find the best way without disturbing their core business agenda, Islam offers social finance institution (amil and nadzir) as the solution to this problem.

scholarly journals RE-EVALUATING SUSTAINABILITY OF MICROFINANCE INSTITUTIONS BY USING TOPSIS

2019 ◽  
Vol 7 (2) ◽  
pp. 581-589
Author(s):  
Muhammad Saad ◽  
Hasniza Mohd Taib ◽  
Abul Bashar Bhuiyan
Keyword(s):  
Multicriteria Decision Making ◽  
Threshold Level ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Bottom Line ◽  
Self Sufficiency ◽  
Order Preference ◽  
Regulatory Bodies ◽  
Composite Scores ◽  
Practical Implications

Purpose: The measurement of sustainability for microfinance institutions (MFIs) has been a serious problem for both practitioners and researchers over the last few decades. A multicriteria decision-making approach is used to develop an index that measures the sustainability of microfinance institutions based on the double bottom line. Methodology: The sustainability score of MFIs operating in Pakistan for the year 2006-2015 is measured using the technique for order preference by similarity to ideal solution (TOPSIS). During the assessment, equal weights are assigned to all indicators of sustainability. Additionally, a hypothetical organization was assigned the industry threshold to generate composite scores using TOPSIS. Later, sustainability levels of individual MFIs were compared with this industry threshold. Findings: Microfinance institutions that attain higher financial sustainability and positive outreach are ranked high. The result shows that the threshold sustainability level of the microfinance sector in Pakistan from 2006-2015 was 23.52, 26.31, 23.80, 45.83, 45.83, 66.67, 77.77, 91.60, and 88.88 percent respectively. Although the sustainability level in 2015 decreases with respect to 2014, still the overall growth of the sector is remarkable. Practical implications: The results obtained from TOPSIS for evaluating the sustainability of MFIs under the double bottom line highlight its practical applicability. MFIs are under immense pressure by regulatory bodies, investors, donors, and financial experts to achieve sustainability. This index would help MFIs to track progress and improve their sustainability. Novelty/Originality: This study is the first of its kind to determine the sustainability of MFI by using all the four indicators of sustainability, including financial self-sufficiency, operational self-sufficiency, depth of outreach and breadth of outreach. Existing sustainability indicators does not provide the threshold level of sustainability. Instead, they provide a ranking of MFIs from top to bottom only. This study is novel to identify whether MFIs have met or failed to achieve sustainability by providing the threshold level.

scholarly journals Assessing the Determinants of Operational Self-Sufficiency of Microfinance Institutions (MFIs) in Afghanistan

2018 ◽  
pp. 31-48
Keyword(s):  
At Risk ◽  
Financial Services ◽  
Poverty Alleviation ◽  
Microfinance Institutions ◽  
Economic Activities ◽  
Loan Portfolio ◽  
The Poor ◽  
Self Sufficiency ◽  
Significant Factors

Microfinance Institutions (MFIs) started providing financial services in Afghanistan since 2003 to take part in poverty alleviation and providing micro loans for the poor entrepreneurs enabling them to expand their economic activities. Since the inception, the Microfinance sector in Afghanistan experienced serious ups and downs and most of the MFIs collapsed and could not become sustainable. Therefore, the aim of this study is to assess the determinants of MFIs sustainability in Afghanistan. To best of researcher’s knowledge, yet, no quantitative researches have been done in the context of Afghanistan to assess the determinants of MFIs sustainability. Using 2SLS econometrics approach through STATA and Eviews, the data of 5 MFIs from 2004 to 2015 was used to assess the determinants of MFIs sustainability. The research’s findings reveal that number of offices, total gross loan portfolio, operational expense to gross loan portfolio and portfolio at risk are statistically significant factors which determine the operational self-Sufficiency of MFIs in Afghanistan. However, other finding of this research shows that ratio of deposit to loan and total expenses to assets have not significant impact on the operational Self-Sufficiency of MFIs in Afghanistan during the study period.

scholarly journals Determinants of Financial Sustainability for Microfinance Institutions: Lessons for Islamic Microfinance Banks in Nigeria

2021 ◽  
Vol 8 (Special Issue) ◽  
pp. 301-320
Author(s):  
Abdurrahman Abdullahi ◽  
Anwar Hasan Abdullah Othman
Keyword(s):  
Capital Structure ◽  
Financial Services ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
The Poor ◽  
Research Findings ◽  
Islamic Microfinance ◽  
Asset Size ◽  
Good Risk ◽  
Economic And Financial Crisis

Islamic microfinance institutions play a major role in the provision of financial services to the poor and underprivileged through non-interest, equity-based products and services. To achieve these critical objectives, however, they need to be financially sustainable, which is threatened by the current economic and financial crisis caused by the Covid-19 pandemic. The objective of this paper is to review the determinants of financial sustainability of microfinance institutions with a view to drawing lessons for Islamic microfinance banks in Nigeria. The paper utilized the literature review methodology to synthesize research findings in the area. The review revealed that the major determinants of financial sustainability of microfinance institutions are the capital structure, asset size, and financial innovation. Others are good risk management and corporate governance frameworks. The paper thus recommended that Islamic microfinance institutions in Nigeria should maintain a robust capital structure that relies more on equity, a lean but diversified Board, and utilize more technology-based services. Most importantly, they should emphasize profit and loss sharing principles in their operations.

Social and Financial Efficiency: A Study of Indian Microfinance Institutions

2020 ◽  
Vol 10 (1) ◽  
pp. 31-43
Author(s):  
Swati Chauhan
Keyword(s):  
Financial Services ◽  
Information Exchange ◽  
Empirical Studies ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Tobit Regression ◽  
Social Efficiency ◽  
Financial Efficiency ◽  
The Government ◽  
Using Data

Microfinance institutions (MFIs) provides savings, credit, insurance and remittance facilities to more impoverished people without any collateral. MFIs have twin goals: social outreach and financial sustainability. Outreach refers to how many people are served by MFIs while the capacity of MFIs to serve longer is financial sustainability. The social and financial performance of MFIs is the most debatable issue in the Indian microfinance industry. Social efficiency indicates MFIs’ willingness to support a higher number of poorer consumers while financial efficiency indicates how long financial services can be offered to the poor by institutions. The success of these organizations is very critical for the continuity of funding support for donor agencies and the government. Using data envelopment analysis (DEA) techniques this paper calculates the efficiency of Indian NGO–MFIs. The research also uses Tobit regression to estimate the factors of the efficiency of MFIs. The data is taken from the Microfinance Information Exchange for the period 2009 to 2015. Results indicate that NGO–MFIs are financially more efficient than social ones. Regression findings show that the critical variable for the financial and social efficiency of NGO–MFIs is operational self-sufficiency (OSS). Very few empirical studies are available in the Indian context that discuss the efficiency of Indian NGO–MFIs. The present paper provides standards for performance measures of NGO–MFIs operating in India to assist in improving the performance and growth of microfinance firms.

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