The Sustainability Model of Microfinance Institutions

Abstract

The sustainability of microfinance institutions is crucial in fostering financial inclusion and economic development, particularly in developing countries. The purpose of this study is to establish the best-fit model for the sustainability of Micro Finance Institutions. Thus, it is important to look into the sustainability of MFIs. This quantitative study employs a structural equation model to assess the relationships among the exogenous and endogenous variables and establish the best-fit model as its purpose. The respondents were 300 MFI managers and employees with supervisory positions. The study found the best-fit model through various goodness-of-fit models. The findings reveal a robust and statistically significant relationship between independent variables, digital transformation, entrepreneurial orientation, and knowledge management, and the dependent variable, sustainability within MFIs. On the best-fit model, digital transformation exhibits a strong and statistically significant positive influence on sustainability. At the same time, knowledge management and entrepreneurial orientation do not show significant direct effects on sustainability in the specific analysis.