scholarly journals Social and Financial Efficiency of Microfinance Institutions in Pakistan

2015 ◽  
Vol 54 (4I-II) ◽  
pp. 389-403 ◽  
Author(s):  
Zahoor Khan ◽  
Jamalludin Sulaiman
Keyword(s):  
Financial Institutions ◽  
Social Role ◽  
Policy Implications ◽  
Financial Ratios ◽  
Microfinance Institutions ◽  
Social Efficiency ◽  
Community Members ◽  
Bottom Line ◽  
Financial Efficiency ◽  
For Profit

Financial efficiency and profitability of „for profit‟ institutions have been traditionally measured with the help of financial ratios [Hassan and Sanchez (2009)]. However, financial ratios are inappropriate to investigate the sources of inefficiency, estimate financial or social efficiency with multiple inputs and outputs, and to decompose the sources of efficiency or inefficiency into technical, technological and scale efficiencies or inefficiencies respectively [Hassan and Sanchez (2009)]. Microfinance Institutions (MFIs) are special institutions, which simultaneously consider their social role to uplift the marginalised community members along with their commercial objective to secure self-sustainability. In standard literature this phenomenon is coined MFIs as being „double bottom line” institutions. [Gutierrez-Nieto, Serrano-Cinca, and Mar Molinero (2007); Gutiérrez-Nieto, Serrano-Cinca, and Molinero (2007)]. This simultaneity differentiates MFIs from conventional financial institutions. The achievement of socioeconomic efficiency is indispensable for MFIs to operate independently and on a wider scale. Thus investigation of socioeconomic efficiency of MFIs is important for monitoring and optimal policy implications.

scholarly journals Does bank regulation and supervision impedes the efficiency of microfinance institutions to eradicate poverty? Evidence from ASEAN-5 countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nurazilah Zainal ◽  
Annuar Md Nassir ◽  
Fakarudin Kamarudin ◽  
Siong Hook Law
Keyword(s):  
Poverty Reduction ◽  
Bank Regulation ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Social Efficiency ◽  
Financial Efficiency ◽  
Content Type ◽  
Regulation And Supervision ◽  
The Social ◽  
Bank Regulation And Supervision

Purpose The purpose of this study is to examine how banking regulation and supervision affect the performance of microfinance institutions (MFIs). It proposes performance of the MFIs from the aspect of social and financial efficiency because the MFIs nowadays not only view to sustain the social role of poverty eradication but in the same time they must strive the financial sustainability to maintain the operation in long run. This study also includes the macroeconomic condition and firm level variables to control for social and financial efficiency of the MFIs. Design/methodology/approach The data consists 168 MFIs from five countries in Southeast Asia from year 2011 to 2017. First stage of analysis is to identify level of social and financial efficiency by using data envelopment analysis approach. Second stage is to examine impact of bank regulation and supervision to the social and financial efficiency by applying panel regression analysis and generalized method of moments for robust estimation methods. Findings The finding shows the MFIs own lower social efficiency and higher score in financial efficiency. This indicates in pursuing financial sustainability, the MFIs in Southeast Asia countries have lost sight of their original mission of poverty reduction. Furthermore, the result also presents a significant impact of bank regulation and supervision to the social and financial efficiency of the MFIs. However, the results appear in different direction when more negative effect is associated with social efficiency. This specifies that bank regulation and supervision are not appropriate to accommodate the social needs, thus hampering the effort of poverty reduction by the MFIs. Research limitations/implications The present study only concentrates on the impact bank regulation and supervision to the performance of the MFIs. As the operation of the MFIs currently has been largely exposed in banking operation, it is suggested that future studies to look for other special issues such as country governance that might influence specifically in social and financial aspect of the MFIs. Practical implications The empirical findings from this study could be useful and may have significant implications for the regulators. The regulators or policymakers could establish the new regulation framework that fulfil the dual needs (social and financial) of the MFIs. Furthermore, the empirical findings also could serve as guidance to regulators and decision-makers in designing new policies for a sustainable and competitive sector of the MFIs. Although the MFIs recently brings a similar role as commercial banks, they need to retain the social aspects as that is the original mission of the MFIs Originality/value The present study proves that the bank regulation and supervision have brought a significant influence to the performance of the MFIs in ASEAN 5 countries.

scholarly journals Implementation of Fuzzy Tsukamoto Algorithm in Determining the Level of Financial Distress in Microfinance Institutions

2018 ◽  
Author(s):  
Andysah Putera Utama Siahaan ◽  
Andre Hasudungan Lubis
Keyword(s):  
Financial Institutions ◽  
Financial Distress ◽  
Business Development ◽  
Community Empowerment ◽  
Microfinance Institutions ◽  
For Profit ◽  
Turnover Ratio ◽  
Consulting Services ◽  
The City ◽  
Existing Data

Fuzzy Tsukamoto is one method that is very flexible and tolerant of existing data. Fuzzy Tsukamoto has the advantage of being more intuitive, accepted by many, more suitable for the input received from humans rather than machines. Microfinance institutions are specialized financial institutions established to provide business development services and community empowerment, either through loans or financing in micro-scale businesses to members and the community, deposit management, and the provision of business development consulting services that are not solely for profit. The purpose of this study is to apply the fuzzy Tsukamoto method to determine the level of financial distress in microfinance institutions in the city of Medan based on the variables Liquidity Ratio, Age Firm, and Cumulative Profitability Ratio, Profitability Ratio, Financial Structure Ratio, Capital Turnover Ratio.

scholarly journals The social and financial efficiency of microfinance institutions: the case of Bosnia and Herzegovina

2017 ◽  
Vol 12 (2) ◽  
pp. 85-101 ◽  
Author(s):  
Velid Efendic ◽  
Nejra Hadziahmetovic
Keyword(s):  
Bosnia And Herzegovina ◽  
Recovery Period ◽  
Secondary Data ◽  
Data Envelopment ◽  
Microfinance Institutions ◽  
Social Dimensions ◽  
Social Efficiency ◽  
Financial Efficiency ◽  
The Social ◽  
Post War

Abstract This paper investigates the financial and social efficiency of microfinance institutions (“MFIs”) in Bosnia and Herzegovina, as well as the effects of the latest crisis on these “two-dimensional” efficiencies. Specifically, we analyze the efficiency of MFIs in Bosnia and Herzegovina (BiH) as a good case of a European, post-war country in transition with a developed micro-financial sector. The efficiency analysis relies on secondary data collected and investigated through Data Envelopment Analysis (DEA). The study covers data for the period commencing in 2008 and ending in 2015. In our empirical investigation, we find a suboptimal level of both financial and social efficiency among MFIs in BiH. However, financial efficiency is significantly higher than social efficiency, while small-sized MFIs over perform larger ones in both the financial and social dimensions. As a result of the crisis, MFIs recorded a declining trend in efficiency up to 2010, after which they began to show signs of slow recovery. However, our results suggest that MFIs prioritized financial over social goals in recovery period following the crisis.

scholarly journals The relationship between the performance and legal form of microfinance institutions

2017 ◽  
Vol 28 (75) ◽  
pp. 377-389
Author(s):  
Ruan Rodrigo Araújo da Costa
Keyword(s):  
Financial Institutions ◽  
Social Impact ◽  
Social Performance ◽  
Microfinance Institutions ◽  
Legal Form ◽  
For Profit ◽  
Governmental Organizations ◽  
Non Governmental Organizations ◽  
Legal Forms ◽  
The Relationship

ABSTRACT This paper investigates the relationship between the legal forms adopted by microfinance institutions (MFIs) and their performance within three scopes: financial performance, social performance, and efficiency in resource allocation. The MFIs studied are classified into four groups: banks, non-governmental organizations, cooperatives, and a fourth group formed of for-profit institutions not characterized as banks, made up of non-bank financial institutions (NBFIs) and rural banks. The data used are annual and cover the six years from 2007 to 2012. The quantitative regression model with panel data was used together with dummy variables to compare between the four groups of legal forms, except for the group made up of NBFIs and rural banks, which was not represented by any dummy variable. 304 MFIs from 59 countries made up the sample. In the study it was observed that larger MFIs have higher profits, higher returns, and higher operational self-sufficiency rates than smaller MFIs, indicating that MFI growth could enable consolidation in the microfinance market. The results also indicate that for smaller MFIs the way to consolidate and improve the indicators could be through assimilating or merging with other MFIs. It was also noted that non-bank financial institutions and rural banks are able to serve more customers and that cooperatives provide smaller loans, causing a bigger social impact, and that they obtain higher returns and profits. The results indicate that these legal forms may be the most appropriate for the microfinance market.

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.

scholarly journals MODEL OF BUSINESS ACTIVITIESS OF MICROFINANCE INSTITUTIONS IN INDONESIA

2017 ◽  
Vol 2 (2) ◽  
pp. 326
Author(s):  
Etty Mulyati ◽  
Kartikasari Kartikasari ◽  
Rai Mantili ◽  
Nun Harrieti
Keyword(s):  
Financial Institutions ◽  
Low Income ◽  
Financial Services ◽  
Limited Liability ◽  
Business Development ◽  
Community Empowerment ◽  
Microfinance Institutions ◽  
For Profit ◽  
Consulting Services ◽  
Purpose Of Business

Micro Finance Institutions (LKM) as non-bank financial institutions, are growing very rapidly in Indonesia. A very large number and scope of business in villages/sub-districts and sub-districts or districts can play a role in an inclusive financial program. The existence of LKM operation much help expand employment and improve the welfare and improving the economy and productivity of the people, especially low-income communities. The problem is how to model the business activities of LKM in Indonesia. This research will use normative juridical approach method, with analytical descriptive research specification. In an effort to provide financial services, which are intended for low-income communities and do not have access to bank financial institutions. LKM can bridge the problems of micro business access to capital is needed in business development. LKM has a different character with the other financial sector businesses, because it is not solely intended for profit. LKM business activities can be done in a conventional or sharia, includes loan/financing for micro enterprises for capital needs in business development, and management of deposits in an effort to bring awareness to the community's fond of saving, besides that LKM also provide consulting services for the purpose of business development community empowerment. To provide legal certainty for the LKM service user community, LKM institutions are regulated in LKM Laws, according to the law the LKM must be a legal entity of the Cooperative or Limited Liability Company Fostering, regulating, and supervising and licensing of LKM is performed by the Financial Services Authority (OJK). 

scholarly journals Implementation of Fuzzy Tsukamoto Algorithm in Determining the Level of Financial Distress in Microfinance Institutions

2018 ◽  
pp. 9-15
Author(s):  
Khairul A ◽  
A. P. U. Siahaan ◽  
Mochammad Iswan Perangin-angin ◽  
Andre Hasudungan Lubis ◽  
Sari Nuzullina Rahmadhani ◽  
...  
Keyword(s):  
Financial Institutions ◽  
Financial Distress ◽  
Business Development ◽  
Community Empowerment ◽  
Microfinance Institutions ◽  
For Profit ◽  
Turnover Ratio ◽  
Consulting Services ◽  
The City ◽  
Existing Data

Fuzzy Tsukamoto is one method that is very flexible and tolerant of existing data. Fuzzy Tsukamoto has the advantage of being more intuitive, accepted by many, more suitable for the input received from humans rather than machines. Microfinance institutions are specialized financial institutions established to provide business development services and community empowerment, either through loans or financing in micro-scale businesses to members and the community, deposit management, and the provision of business development consulting services that are not solely for profit. The purpose of this study is to apply the fuzzy Tsukamoto method to determine the level of financial distress in microfinance institutions in the city of Medan based on the variables Liquidity Ratio, Age Firm, and Cumulative Profitability Ratio, Profitability Ratio, Financial Structure Ratio, Capital Turnover Ratio.

Effects of Financial Innovations on Profitability for Deposit Taking Microfinancing Institutions in Kenya

2018 ◽  
Vol 9 (6) ◽  
pp. 529-536
Author(s):  
Martin Khoya Odipo ◽  
Keyword(s):  
Financial Institutions ◽  
Positive Relationship ◽  
Financial Institution ◽  
Secondary Data ◽  
Financial Statements ◽  
Descriptive Statistics ◽  
Primary Data ◽  
Microfinance Institutions ◽  
Financial Innovations ◽  
Strong Positive Relationship

Recent studies have documented that innovations improve profitability of firms. This article documents that deposit taking micro financial institutions that have adopted financial innovations have increased their profitability. The study covered five years between 2009-2013. Both primary and secondary data were used in the study. Primary data was obtained through administration of drop and pick questionnaires to selected employees of the institutions. Secondary data was obtained from financial statements and management reports of these deposit taking microfinance institutions. Data was analyzed using descriptive statistics, return on asset and multi-liner regression model to determine the effect of each financial innovation applied on profitability on the micro-financial institution. The results showed that most deposit taking microfinance institutions adopted these financial innovations in their current operations. There was strong positive relationship between individual innovations and profitability. In line with profitability ROA also showed improvement each year after the adoption of these financial innovations.

The Role of Mobile Money in Moderating Financial Exclusion: A Tanzanian Experience

2020 ◽  
Vol 2 ◽  
pp. 1-24 ◽  
Author(s):  
Deogratius Joseph Mhella
Keyword(s):  
Developing Countries ◽  
Financial Institutions ◽  
Banking Sector ◽  
Research Question ◽  
Microfinance Institutions ◽  
Mobile Money ◽  
Access To Credit ◽  
Financial Exclusion

Prior to the advent of mobile money, the banking sector in most of the developing countries excluded certain segments of the population. The excluded populations were deemed as a risk to the banking sector. The banking sector did not work with cash stripped and the financially disenfranchised people. Financial exclusion persisted to incredibly higher levels. Those excluded did not have: bank accounts, savings in financial institutions, access to credit, loan and insurance services. The advent of mobile money moderated the very factors of financial exclusion that the banks failed to resolve. This paper explains how mobile money moderates the factors of financial exclusion that the banks and microfinance institutions have always failed to moderate. The paper seeks to answer the following research question: 'How has mobile money moderated the factors of financial exclusion that other financial institutions failed to resolve between 1960 and 2008? Tanzania has been chosen as a case study to show how mobile has succeeded in moderating financial exclusion in the period after 2008.

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