Influence of Financial Leverage on Financial Sustainability. A Case of a Microfinance Institution in Kenya

Microfinance institution plays a crucial role in economic development and financial inclusion. Financial sustainability is the key dimension to microfinance institutions growth. Which further indicate the importance of which Financial sustainability is. Therefore, the present study investigated the effect of financial leverage on MFI financial sustainability. The specific objective was to establish the effect of financial leverage on the financial sustainability of MFIs. The study was guided by agency theory and life-cycle theory. The study adopted an explanatory research design where a panel approach was used as well as the positivist paradigm. The study adopted the census approach method. Panel data was drawn from 30 MFIs for a period between 2010 and 2018 from the mix market database using the data collection schedule. The study used both descriptive and inferential statistics to analyze data with the help of STATA software. Fixed effect model based on Hausman test (X2 = 45.41, p= 0.000 ≤ 0.05). Based on the findings of the study financial leverage ( the study had a positive and significant effect on the financial sustainability of MFIs. The study recommended MFIs managers to engage in the prudent use of financial leverage so that they enhance their overall profitability and boost investor confidence in their strategic decision-making resulting in financial sustainability. The results have an implication to business managers and policymakers given the vital role in service delivery and the challenges hindering the sector from the realization of financial sustainability in the economy.

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COMPARISON OF PERFORMANCE OF MICROFINANCE INSTITUTIONS WITH COMMERCIAL BANKS IN INDIA

Australian Journal of Business and Management Research ◽

10.52283/nswrca.ajbmr.20110106a12 ◽

2012 ◽

Vol 01 (06) ◽

pp. 110-120

Author(s):

Zohra Bi ◽

Shyam Lal Dev Pandey

Keyword(s):

Financial Performance ◽

Commercial Banks ◽

Information Exchange ◽

Financial Structure ◽

Financial Data ◽

Financial Sustainability ◽

Microfinance Institutions ◽

Access To Finance ◽

Development Tool ◽

Microfinance Institution

Microfinance in India has been viewed as a development tool which would alleviate poverty and enhance growth of the country through financial inclusion. Out of 6 lakh villages in India, only approximately 50000 have access to finance. India is a country which has the highest number of households which are excluded from banking. With the Andhra crisis of microfinance institutions and issues that microfinance institutions have a mission drift, the aim of the paper is to study the performance and efficiency of microfinance. A sample of microfinance institutions in India have been selected based on their ratings given by microfinance information exchange (MIX) for the study. The performance of these sample MFIs as well as their performance with respect to commercial banks in India have been studied using statistically tools. A microfinance institution is measured for financial sustainability based on its good financial accounts and the recognized accounting practices they follow according to Meyer (2002). Data for the microfinance institutions have been collected from Microfinance information exchange (MIX) where few of the MFIs have started reported their financial data. The MIX has classified the MFIs based on various parameters such as level of disclosure, financial parameters etc and rated them accordingly. Out of the 88 MFIs in India reported on MIX, 24 MFIs are taken as samples, these samples taken were five star rated by MIX. The financial parameters of these MFIs are studied and compared with the financial parameters of commercial banks and their financial performance can be analyzed. The various parameters taken for analyzing the financial performance of MFIs and banks include: Financial structure, Profitability and Efficiency.

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APPLICATION OF THE NET ASSET’S METHOD FOR EVALUATION OF THE WINE-PRODUCING ENTERPRISE’S FINANCIAL SUSTAINABILITY

Knowledge International Journal ◽

10.35120/kij3101123y ◽

2019 ◽

Vol 31 (1) ◽

pp. 123-127

Author(s):

Petya Yordanova – Dinova

Keyword(s):

Economic Activity ◽

Current Paper ◽

Financial Sustainability ◽

Financial Leverage ◽

Sustainability Evaluation ◽

Important Indicator ◽

Practical Applications ◽

Net Assets

In the current paper is presented one of the financial sustainability’s assessment, namely the method of net assets. Financial sustainability is over seed like long termed, stable financial state, backed by owned financial sources. Financial sustainability is differentiated in two general types – external and internal. External financial sustainability is connected with enterprise’s capability to settle its accounting interrelation with its counteragents and creditors. Internal financial sustainability suggests assurance of the assets with enough source of equity. The value of the net assets is important indicator, characterizing the structure of the capital and the determination of net asset’s level. The value of the net assets it’s in the base of determination of asset’s value, the financial leverage, the price and the equity’s rentability. The main object of this paper is the practical applications of the wine-producing enterprises financial sustainability evaluation through the method of the net assets. The outcome of paper’s research can be used by any stakeholders who are interested from this kind of economic activity.

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STRATEGI MEWUJUDKAN KEMANDIRIAN SEKTOR FINANSIAL LOKAL MELALUI SUSTAINABILITAS LEMBAGA KEUANGAN MIKRO SYARIAH (BAITUL MAAL WATAMWIL, BMT)

Jurnal Terapan Abdimas ◽

10.25273/jta.v3i2.2793 ◽

2018 ◽

Vol 3 (2) ◽

pp. 85

Author(s):

Yus Indra

Keyword(s):

Internal Control ◽

Best Practice ◽

Financial Institution ◽

Capital Adequacy ◽

External Support ◽

Financial Sustainability ◽

Factors Affecting ◽

Institutional Sustainability ◽

Practice Approach ◽

Microfinance Institution

Abstract. Sustainability of Sharia Microfinance Institution or BMT is influenced by institutional sustainability, financial sustainability and external support. Aspects of sustainability are organizations, policies and procedures, internal control systems, tasks and authorities, financing risk management, human resources and outreach of products and activities, aspects affecting financial sustainability are capital adequacy, asset quality, liquidity , profitability and efficiency, while the factors affecting the external support are Laws and Regulations, Supervisory of authority and Associate Agencies (APEX). To build sustainability BMT then must attention to aspects mentioned above. This research is motivated by previous studies on financial sustainability of micro finance institutions, through best practice approach in financial institution generally conducted research to get, test and reconstruct to other aspects of sustainability of microfinance institution, that is aspect related to institution. This is due to the limited research that discusses institutional sustainability. Based on the research, it can be concluded that sustainability of BMT is influenced by institutional sustainability, financial sustainability and external support, but in the implementation stage it is necessary to re-implement the management based on best practice approach of bankingKeyword : sustainability, governance Abstrak. Sustainabilitas Lembaga Keuangan Mikro Syariah atau BMT dipengaruhi oleh sustainabilitas kelembagaan (institutional sustainability), sustainabilitas keuangan (financial sustainability) dan dukungan eksternal. Aspek yang mempengaruhi sustainabilitas adalah organisasi, kebijakan dan prosedur, sistem pengendalian internal, tugas dan kewenangan, manajemen risiko pembiayaan, Sumber Daya Insani dan keterjangkauan produk dan aktivitas. Aspek yang mempengaruhi sustainabilitas keuangan adalah kecukupan permodalan, kualitas aset, likuiditas, profitabilitas dan efisiensi, sedangkan faktor yang mempengaruhi dukungan eketernal adalah Undang-Undang dan regulasi, otoritas pembinaan dan pengawasan dan lembaga pengayom (APEX). Penelitian ini dilatarbelakangi oleh penelitian terdahulu mengenai sustainabilitas keuangan lembaga keuangan mikro, melalui pendekatan best practice perbankan dilakukan penelitian untuk merekontruksi kembali hasil penelitian terhadap aspek-aspek dari sustainabilitas lembaga keuangan mikro, yaitu aspek-aspek yang terkait dengan kelembagaan (institutional). Hal ini mengingat masih terbatasnya penelitian yang membahas mengenai sustainabilitas kelembagaan (institutional sustainability). Berdasarkan penelitian diperoleh hasil bahwa sustainabilitas BMT dipengaruhi oleh sustainabilitas kelembagaan (institutional sustainability), sustainabilitas keuangan (financial sustainability) dan dukungan eksternal, namun dalam tahap implementasinya perlu dilakukan pentatakelolaan kembali berdasarkan pendekatan best practice perbankan.Kata Kunci : sustainabilitas, tatakelola

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