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 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 Social and financial performance of MFIs: complementary or compromise?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nitin Navin ◽  
Pankaj Sinha
Keyword(s):  
Financial Performance ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Current Time ◽  
Content Type ◽  
Dynamic Framework ◽  
The Social ◽  
Loan Size ◽  
The Relationship ◽  
Practical Implications

Purpose With the ongoing transformation of the microfinance sector, questions have been raised on the ability of microfinance institutions (MFIs) to perform financially well without compromising with their social objectives. The current study attempts to analyse the social and financial performance of Indian MFIs with an objective to find the kind of relationship between these two objectives. Design/methodology/approach The dynamic framework of simultaneous equations model is used to find the nature of the relationship which exists between social and financial performance of Indian MFIs. Findings The study finds that depth of outreach enables MFIs to achieve financial sustainability. On the other hand, financially strong MFI lend more as reflected by an increase in their average loan size. Research limitations/implications Many MFIs still receive subsidies to support their operations. Ideally, adjustments should be made to remove the effect of such subsidies on their cost. However, due to non-availability of data, the study fails to make any adjustment for the subsidies. Practical implications The presence of a complementary relationship between social and financial performance in the Indian microfinance sector is quite encouraging for the policymakers during the current time when the sector is becoming less dependent on subsidies. However, the recent upsurge in the average loan size requires attention. Social implications The findings suggest that MFIs can achieve financial sustainability while targeting poor clients. This indicates that MFIs can perform socially good along with their financial performance. Originality/value Such study is vital when the Indian microfinance sector is moving away from subsidies to become self-reliant and commercialised. Few studies have focused on this aspect of Indian microfinance sector.

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 Governance And Sustainability of Networked MFIs: Case of the CamCCul Network in Cameroon

2021 ◽  
Vol 4 (3) ◽  
pp. 141-155
Author(s):  
Nguenbu T. ◽  
Nzongang J.
Keyword(s):  
Risk Management ◽  
Social Sustainability ◽  
Management Program ◽  
The Other ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Self Sufficiency ◽  
Risk Management Program ◽  
External Governance ◽  
The One

The objective of this study is to determine the effect of internal and external governance mechanisms on the sustainability of the microfinance institutions of the CamCCul network in Cameroon. The study is conducted on a sample of 34 MFIs of the network over the 7-year period from 2009 to 2015. The results show, on the one hand, that the MFI's adherence to the network’s Risk Management program significantly and positively affects the financial sustainability of MIFs measured by their operational self-sufficiency. On the other hand, we find that the ownership of UBC Bank shares by the MFI and the culture of the zone of activity positively and significantly affect the MIFs social sustainability measured by the number of active borrowers.

scholarly journals Capital structure and financial sustainability of Microfinance Institutions (MFIs) in Rwanda

2021 ◽  
Vol 2 (1) ◽  
pp. 6-26
Author(s):  
Jean Marie Rutanga ◽  
Jonas Barayandema ◽  
Samuel Mutarindwa
Keyword(s):  
Capital Structure ◽  
Fixed Effects ◽  
Data Availability ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Return On Assets ◽  
Share Capital ◽  
Self Sufficiency ◽  
Significant Difference ◽  
Retained Earnings

The aim of this study was to assess the effect of capital structure on financial sustainability of microfinance institutions (MFIs), and find out the extent to which capital structure affects financial sustainability of MFIs in Rwanda. Data was collected from annual financial reports of MFIs and SACCOs for the period 2014-2018. Due to data availability, only a panel of 20 MFIs and SACCOs was considered using fixed effects OLS regression models. Findings from this study reveal that the use of debt as financing sources adversely affects firms‘ financial self-sufficiency and performance. In contrast, the use of share capital strongly improves firms‘ operational and financial sustainability as well as their return on assets. Using retained earnings moderately and positively increases firm‘s financial sustainability. Results from sample splits show that compared to MFIs, SACCOs are more likely to be adversely affected by debt financing than their MFI counterparts. With respect to share capital, there is significant difference between the two groups. Using share capital to finance MFIs‘ investments significantly increases their return on assets, their operational and financial self-sufficiency. With respect to SACCOs, results show that using share capital as means of financing firms‘ assets negatively and significantly affects their return on total assets as well as their operating and financial self-sufficiency.

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 FINANCIAL OUTREACH AND FINANCIAL SUSTAINABILITY OF LICENSED DEPOSIT TAKING MICROFINANCE INSTITUTIONS IN NAIROBI CITY COUNTY, KENYA

2020 ◽  
Vol 5 (2) ◽  
pp. 69
Author(s):  
Rabecca Nundu Mutua ◽  
Ambrose Jagongo ◽  
Eddie Simiyu
Keyword(s):  
At Risk ◽  
Central Bank ◽  
Credit Risk ◽  
Financial Sustainability ◽  
Unique Contribution ◽  
Microfinance Institutions ◽  
Loan Loss ◽  
Self Sufficiency ◽  
Loan Size ◽  
The Relationship

Purpose: The purpose of this study was to investigate the relationship between financial outreach and financial sustainability of deposit taking microfinance institutions in Nairobi County, Kenya. Methodology: The study employed a positivism research philosophy to determine the relationship between financial outreach and financial sustainability. A population of 13 licensed Deposit Taking Microfinance Institution was considered for this study. Census method was preferred due to small number of target population. A static Panel linear regression model with fixed effect was developed for both operating self-sufficiency and financial self-sufficiency. Secondary data was obtained from Central Bank of Kenya from audited financial statements. Inferential analysis method was employed using Stata statistics software then descriptive statistics tool such as mean and standard deviations were used. several diagnostic tests were conducted namely: normality, multicollinearity, heteroscedasticity, serial correlation, stationarity and Hausman. Results: The study found that number of active clients (breath of outreach) had statistically significant relationship; Average loan size (depth of outreach) had insignificant; age of firm (experience of institution) had insignificant relationship on financial sustainability of DTMFIs in Nairobi County, Kenya. The moderating effect between credit risk management (portfolio at risk) and breadth of outreach (number of active clients) was positive while portfolio at risk and experience of institution (age) and depth of outreach (average loan size) was negative on the relationship between financial outreach and (OSS and FSS) financial sustainability. Further, loan loss provision coverage had positive interaction with number of active clients, age, and average loan size on the relationship between financial outreach and   financial sustainability of DTMFIs in Nairobi County, Kenya. Unique contribution to theory, practice and policy: The study recommended that the government through Central Bank of Kenya should formulate policies that enhance savings with DTMFIs and therefore encourage financial inclusion.  Further, DTMFIs should engage in vigorous financial education to boost financial facilities’ awareness to boost the breadth of outreach and get involved in information collection and sharing to mitigate credit risk.

scholarly journals Measuring the Environmental Maturity of the Supply Chain Finance: A Big Data-Based Multi-Criteria Perspective

Logistics ◽  
2021 ◽  
Vol 5 (2) ◽  
pp. 22
Author(s):  
Hisham Alidrisi
Keyword(s):  
Big Data ◽  
Supply Chain ◽  
Multicriteria Decision Making ◽  
Analytic Network Process ◽  
Assessment Model ◽  
Self Assessment ◽  
Interpretive Structural Modeling ◽  
Supply Chain Finance ◽  
Network Process ◽  
Order Preference

This paper presents a strategic roadmap to handle the issue of resource allocation among the green supply chain management (GSCM) practices. This complex issue for supply chain stakeholders highlights the need for the application of supply chain finance (SCF). This paper proposes the five Vs of big data (value, volume, velocity, variety, and veracity) as a platform for determining the role of GSCM practices in improving SCF implementation. The fuzzy analytic network process (ANP) was employed to prioritize the five Vs by their roles in SCF. The fuzzy technique for order preference by similarity to ideal solution (TOPSIS) was then applied to evaluate GSCM practices on the basis of the five Vs. In addition, interpretive structural modeling (ISM) was used to visualize the optimum implementation of the GSCM practices. The outcome is a hybrid self-assessment model that measures the environmental maturity of SCF by the coherent application of three multicriteria decision-making techniques. The development of the Basic Readiness Index (BRI), Relative Readiness Index (RRI), and Strategic Matrix Tool (SMT) creates the potential for further improvements through the integration of the RRI scores and ISM results. This hybrid model presents a practical tool for decision-makers.

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.

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