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

Abstract

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.