Evaluating the Sustainability of Microfinance Institutions Considering Macro-Environmental Factors: A Cross-Country Study

Wei Xu,Hongyong Fu,Huanpeng Liu

doi:10.3390/su11215947

Abstract

Microfinance institutions (MFIs) have attracted great attention, due to their significant role in poverty reduction. Given the features of MFIs, this paper proposes a novel hybrid model of soft set theory, and an improved order preference by similarity to ideal solution (HMSIT) to evaluate the sustainability of MFIs, considering accounting ratios, corporate governance factors, and macro-environmental factors, from a cross-country perspective. This setting enables the examination of the role of macro-environmental factors in the sustainability of MFIs. For this purpose, soft set theory is adopted to select optimal criteria. An improved order preference by similarity to ideal solution method, in which the weight of each criterion is determined by soft set theory, is proposed to rank the sustainability of MFIs. This algorithm enables HMSIT to make full use of various types of information. The case study uses cross-country samples. Results indicate that macro-environmental factors are significant in evaluating the sustainability of MFIs from a cross-country perspective. Particularly, they can play a key role in distinguishing MFIs with low sustainability. The results also indicate that HMSIT has strong robustness. Ranked results, produced from the proposed HMSIT are reliable enough to provide some managerial suggestions for MFIs and help stakeholders make decisions.

Highlights

According to the recent disclosure of the World Bank, the total volume of people who are still struggling to meet basic needs was 3.4 billion in 2018, which is almost half the world’s population
To verify the influence of macro-environmental factors when evaluating the financial sustainability of Microfinance institutions (MFIs) from a cross-country perspective, according to the prior literature [16,24], we conduct the case study again, but with the accounting ratios and corporate governance factors only
The significant role of MFIs in poverty reduction has led to extensive research on their financial sustainability

Summary

Introduction

According to the recent disclosure of the World Bank, the total volume of people who are still struggling to meet basic needs was 3.4 billion in 2018, which is almost half the world’s population. This demonstrates the magnitude of the challenge of worldwide poverty reduction and the significance of work in this field [1,2]. Tdhitiisoenmtophsaosciziaelsatnhed ffiinnaanncciaial lsesulf-sstuaifnfiacibeinlictyy,omf MorFeIsa,nadndmaore sturodeuditerusecahtciaohvn.eIinnparreeidlcieaannttcteeynoetanirodsn,ointnooarthdfudenietdinosvn[i6rt,oo1n2sm]o. cTeinhaletaaolntshduefsritniasainsnoaccibaiailllistsuyussottafaiinMnaaFbbIiilsliit[ty1y,3,m,w1o4h]ri,echaanfnoadclyumzsieonsrgeontshtsueodcgiireaeslen envhiarvoenmpaeindt patetrefnotriomnantocethoef MenFvIsir.onAmfiennatanlcisaulslytaisnuasbtialiintyabolfe MMFFIIsis[1r3e,q14u]i,readn,ailnyzoinrdgerthteo garceheineve soceinavl iarnodnmenenvtirponermfoernmtaalnscuesotaf iMnaFbIisl.itAy [f1in5]a.nTcihaellryefsourset,atihniasbpleapMeFr Ifoiscurseeqsuoirnede,vianluoartdinerg ttoheacfihniaenvecial susstoaciinaal banildityenovfiMronFmIs.enIntaol tshuesrtawinoarbdilsi,tyw[e15a]t.tTemhepretftooree,vtahliusaptaeptehrefoficnuasnecsioanl seevlaf-lsuuaffitincgietnhceyfionfaMncFiaIls

Objectives

Methods

Results

Conclusion