Abstract
Purpose: the objective is to measure the financial and social performance of 127 microfinance institutions (MFIs) and observe the effects with explanatory factors such as “type”, “geography region”, and “secular and faith” variables. Design/methodology/approach: The time-series performance analysis of microfinance institutions is determined in two stages. In the first stage, both the social and financial efficiencies are measured with Data Envelopment Analysis (DEA) approach. The two explanatory factors along with faith and secular variables show the effect on these determined efficiencies by the second stage of the Tobit regression Random effect Model. Findings: Financial performance is greater than the social performance from the first stage analysis. When considering the explanatory variables, the social performances are not significant with religious factors. When the regression is performed in a group, the financial score is more significant with religious and other explanatory variables. Faith-based and secular-based microfinance institutions are strongly significant if the performances (efficiencies) are highly maintained. Originality/Value: faith and secular variables are identified based on the background/history information of each microfinance institution (MFI).
Highlights
Financial services for an individual ameliorate inclusion and performing business activities for obtaining a smooth economy (Li et al 2019)
It is observed that microfinance institutions (MFIs) emerged from traditional banks to calculate and function their administration based on the profit efficiency, operating costs, and returning capital constraints which leads to economical profit being more important than social outreach (Kar 2012)
This study examines the cross-country efficiency analysis of 127 MFIs followed by the religious beliefs and principles from 25 countries
Summary
Financial services for an individual ameliorate inclusion and performing business activities for obtaining a smooth economy (Li et al 2019). (Alimukhamedova 2013), while the access to traditional banks for the same destitute has been difficult for financial advancement activities. It is observed that MFIs emerged from traditional banks to calculate and function their administration based on the profit efficiency, operating costs, and returning capital constraints which leads to economical profit being more important than social outreach (Kar 2012). One or group of efficiency (financial, social, and technological) is important in the functioning of a financial organizations to sustain bankruptcy or shutting down. Few dimensions of MFIs (NBFC1, credit unions, micro-credits, rural banks, NGOs2) were taken into consideration for the influence of their services and functionalities. Few operate with the spirit of capitalism (private ownership) but always abide by the reserve bank guidelines
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