Performance Of Microfinance Institutions Research Articles

Navigating the Cascading Ripples: A Study on the Interplay between the COVID-19 Recession and the Financial Fortunes of Micro Finance Institutions (MFIs)

Purpose: The success of Micro Finance Institutions (MFIs) hinges on effective decision-making amidst challenging economic circumstances, necessitating the ability to anticipate and navigate future business conditions. This research aims to explore the relationship between financial performance and the COVID-19 pandemic's impact on MFIs listed on the National Stock Exchange (NSE) in India. By analyzing financial data and employing statistical techniques, the study seeks to elucidate the resilience of MFIs during the pandemic and the role of financial ratios in predicting earnings per share (EPS). Additionally, the research aims to contribute to a deeper understanding of the interplay between financial indicators and organizational outcomes within the microfinance sector. Design/Methodology/Approach: This research adopts a quantitative approach, utilizing secondary data obtained from quarterly financial reports of selected MFIs listed on the NSE from 2018 to 2022. Statistical analyses such as paired t-tests, correlation, and regression are employed to assess the impact of the COVID-19 pandemic recession on MFIs' profitability and to investigate the relationship between financial ratios and earnings per share (EPS). Findings/Result: Despite the COVID-19 pandemic recession, the profitability of Indian Micro Finance Institutions (MFIs) remained largely unaffected, as indicated by non-significant differences in earnings before interest and taxes (EBIT) before and after the pandemic. Regression analysis highlighted significant influences of financial ratios like the current ratio, total asset ratio, net profit ratio, and gross profit ratio on earnings per share (EPS), underscoring the sector's resilience and the importance of financial analysis in predicting MFI performance. Originality/Value: This research offers novel insights into the resilience of Indian Micro Finance Institutions (MFIs) during the COVID-19 pandemic and underscores the significance of financial analysis in guiding strategic decision-making processes within the microfinance sector. Paper Type: Empirical Research.

Influence of Credit Risk Management Practices on Loan Performance: A Case of Selected Microfinance Institutions in Tanzania

This research investigates the influence of credit risk management practices on loan performance of microfinance institutions. The variables of interest in this study are credit appraisal, credit supervision, credit monitoring (as predictor variables) and loan performance (as dependent variable). However, the study includes average credit processing time as a control variable. The study focuses on five microfinance institutions operating in Tanzania. The research utilizes probability and non-probability sampling to select 140 respondents from the study population. The study collected both primary and secondary data. Data analysis was carried out by applying multiple regression analysis following the assumptions of ordinary least squares (OLS). The findings reveal that credit supervision, credit monitoring, and average credit process time are significant in influencing loan performance in microfinance institutions. Contrary, there is no evidence, whatsoever to suggest that credit supervision influences loan performance in microfinance institutions.

Effect of Digital Marketing on the Financial Performance of Microfinance Institutions in Rwanda

In this study, the effect of digital marketing on the efficiency of microfinance institutions in the Musanze region was specifically examined. The goal was to assess the effect of digital marketing on the financial performance of the selected MFIs in Musanze district. The specific objectives of the study were to examine the effect of Social Media Marketing on performance of MFIs in Musanze district, to analyze the effect of Influencer Marketing on the performance of MFIs, to ascertain the effect of Mobile Marketing on the performance of MFIs, while also assuring the satisfaction of their staff and that they are operating efficiently to increase revenues. The goals also include implementing technology, measuring the effectiveness of microfinance institutions in the nation that have lagged behind in the marketing sector, and identifying the usual digital marketing channels used by Rwanda's microfinance institutions. The probability sampling technique (Simple Random Sampling) was used in conjunction with stratified sampling approach. This study gathered information from 154 employees at 14 microfinance organizations using a quantitative approach. Both descriptive and inferential statistics were used for the data analysis. The binary regression model and SPSS 24 SOFTWARE were also used for data analysis. The study's findings demonstrate that digital marketing significantly improves how microfinance businesses run. According to respondents, Digital marketing's contribution to the expansion of the loan portfolio is frequently considered to be of negligible importance. This study suggests that microfinance institutions can more fully utilize technology to ensure that their daily tasks are done.

Effect of Capital Structure on Financial and Social Performance of Indian MFIs: A Bibliometric Analysis and Systematic Literature Review

Microfinance Institutions (MFIs) play a crucial role in financial inclusion and social empowerment, with funding sources significantly influencing their overall performance. Despite existing research efforts on the relationship between capital structure and the performance of MFIs, a notable gap remains in the literature, particularly concerning Indian MFIs. This study aims to address this void by examining the influence of capital structure on the financial and social performance of Indian MFIs. The study aims to assess the effect of capital structure on financial and social performance through a systematic literature review of 20 articles using Scopus and Google Scholar. Network analysis and systematic literature review methodologies, employing tools such as Bibliometrix and VOSviewer, were used to scrutinize the selected records. Findings reveal inconclusive outcomes on the effect of capital structure on MFIs' performance, specifically in the heterogeneous context of India, highlighting that while Indian MFIs utilize debt financing to expand services, it may elevate credit risk and non-performing assets, negatively impacting overall performance. The empirical results can guide MFIs in optimizing their capital structures for financial self-sufficiency, enabling better services for underserved populations. The study underscores the need for more empirical analyses, incorporating additional variables and a broader range of MFIs, to enhance reliability and provide actionable recommendations for financing structures and diversified funding sources.

Strategic alliances and social performance of microfinance institutions in Indonesia

AbstractThe objective of this study is to understand how strategic alliances and dynamic capabilities influence the performance of microfinance institutions (MFIs) in Indonesia. The research was conducted on a sample of 235 CEOs/top leaders of MFIs spread across all provinces in Indonesia. Data collection used survey questionnaires. Data testing used SPSS version 25, and structural modeling used Amos version 25. The findings show that strategic alliances significantly influence dynamic capabilities and dynamic capabilities significantly influence social performance. Social performance has a significant effect on financial performance. MFIs are important in establishing strategic alliance and strengthening their dynamic capabilities to improve social performance (depth and breadth of reach) and affect financial performance. Social performance includes the depth of the reach to contribute to improving the quality of life of people experiencing poverty around the MFI's operations and the social responsibility of MFIs to the community through scholarships, free medical assistance, basic food assistance, and building/renovating houses of worship and others.

What are the determinants of the financial and social performance of MFIs in Togo? Does gender borrower matter on financial performance?

Using the panel generalized method of moments, we scrutinize the key factors of financial and social performance of Microfinance institutions (MFIs) in Togo. We report that a higher increase in equity leads to MFIs' financial sustainability while an increase in debt leads to unsustainability. Furthermore, the increase in staff expenditure and operational efficiency decreases financial performance. Interestingly, in the context of Togo, the percentage of male borrowers contributes more strongly to the profitability and sustainability of MFIs than female borrowers. However, in terms of loan repayment, female borrowers contribute more to the sustainability of MFIs than male borrowers

The Mediation Effect of Competitive Advantage on Managerial Competencies-Financial Performance Nexus of Microfinance Institutions in Uganda

Purpose: This study examined the mediating effect of competitive advantage in the relationship between managerial competencies and financial performance of Microfinance Institutions (MFIs) in Uganda.
 Materials and Methods: Adopting a cross-sectional design and a quantitative approach, the study covered 94 Ugandan microfinance institutions, which are members of the Association of Microfinance Institutions in Uganda (AMFIU) in all regions of Uganda. A sample size of 76 MFIs was utilized to collect questionnaire data. The mediating effect of competitive advantage was tested using Hierarchical regression while
 Findings: The study established that competitive advantage partially mediates the relationship between managerial competencies and the financial performance of MFIs in Uganda. The study also concluded that MFIs that survive competition are only those that nourish their competitive strategies and refine their strategic direction, thus improving their financial performance.
 Implications to Theory, Practice and Policy: The study recommends MFIs design policies aimed at attracting competent managers with the relevant skills, knowledge, and abilities. Besides investment in physical capital, MFIs should devise deliberate competitive strategies aimed at enhancing their ability to develop attributes that allow them to outperform their competitors.

Progress and performance of microfinance institutions in Haryana

Progress and performance of microfinance institutions in Haryana

Income Diversification and Financial Sustainability of Indian Microfinance Institutions (MFIs): An Empirical Study

Microfinance institutions (MFIs) emerged intending to provide financial services to underserved populations, fostering economic inclusion and poverty alleviation. However, achieving this aim is wholly based on the MFIs’ financial sustainability and profitability. MFIs’ fundamental structural restrictions might make raising income through increased interest rates difficult. As a result, it is now widely acknowledged that MFIs with various revenue streams outperform those primarily focused on lending in terms of financial sustainability. This study investigates this link by assessing the impact of income diversification on the financial performance and financial self-sufficiency of the top ten listed Indian MFIs. The study uses eight years of panel data from 2016 to 2023, and analysis was made by applying descriptive statistics, Herfindahl-Hirschman Index (HHI), and panel data regression models. Our findings provide empirical support for the banking studies’ preference for focused strategies over diversification strategies, showing that expanding income sources has no impact on the financial performance (return on equity/return on asset) and financial self-sufficiency (FSS) of Indian MFIs.

Economic Freedom and Financial Performance of Microfinance Institutions (MFIs): Asian Perspective

Economic Freedom and Financial Performance of Microfinance Institutions (MFIs): Asian Perspective

A Dynamic Analysis of the Performance of Islamic Microfinance Institutions in OIC Countries-The Influence of Digitalization

The performance of microfinance institutions is debatable. Evidence shows that some microfinance institutions successfully achieve dual objectives, social and financial, while some fail to achieve them. Islamic microfinance institutions (IMFIs) are widely accepted in OIC countries as its products are based on Islamic principles, however its share is very small in the world. Therefore, this study aims to investigate the impact of macroeconomic, macro institutional factors and digitalization on the financial and social performance of Islamic microfinance institutions in OIC countries. Using panel data of 35 Islamic microfinance institutions from 2008 to 2019. The results found that macroeconomics and country-level institutional variables have mixed impact on the performance of Islamic microfinance institutions. In addition, digitization enhances the performance of (IMFIs). The study presents several policy recommendations for improvement in performance.

Efficiency and Performance of Microfinance Institutions: A Systematic Literature Review

This study was conducted to find out common knowledge in the empirical literature pertaining to the performance and efficiency of microfinance institutions (MFIs), as well as the areas that require more attention for future research. The systematic literature review (SLR) technique was applied and the article selection and findings were reported according to the PRISMA guidelines. 69 empirical journal articles between 2013 and 2023 were included from Scopus database. (1) Efficiency of MFIs (Financial & Social efficiency) (2) performance of MFIs (Social & Financial Performance), (3) sustainable performance of MFIs, were identified as the three most common knowledge clusters. The review established that efficiency and conventional performance analysis of MFIs differ in methodologies and perspectives. Further, it was found that performance assessment, efficiency measurement, productivity, sustainability, and outreach of MFIs are infrequently investigated areas. Financial efficiency, social efficiency, financial performance, and social performance of MFIs were also identified as averagely investigated, creating avenues for more future studies. Thus, the study emphasized the need for further research diversifying perspectives on overall MFI performance to ensure lasting success.

Credit Management as a Predictor to the Sustainability of Microfinance Institutions

Purpose: This study was carried out to understand the relationship between credit management and the financial performance of Micro Finance Institutions, taking a sample of 43 MFIs administrators in the towns of Dschang, Mbouda and Bafoussam of Cameron.
 Method: The study applied a quantitative research design, where questionnaires were used. Data was collected from both primary and secondary sources. Data was processed and analyzed using formal tables, pie charts, multiple linear regressions, and Anova, chi-squared, Cronbash’s Alpha, Pearson tests were carried out to understand the relationship between credit management and financial performance Microfinance Institution in Cameroon. A total of 43 respondents were considered out of the entire population.
 Findings: Findings indicate that credit policies, debt recovery technique mechanisms are significant and positively related to the portfolio quality of MFIs in Cameroon. More specifically, good lending policies such as proper study of the loan documents, group liability, monitoring repayment frequency would increase financial performance. In addition, recovery techniques such as constant customer reminder, prolonging recovery period, penalties etc, enabled MFIs to perform financially well.
 Originality value: This study explores and shed light on an important factor responsible in majority for the unpaid installment debts in the Cameroon context; the MFI itself through the personal and friendly relationships with clients. Thus we provide practical strategies for the recovery of these debts till the last franc. In addition, we show that these strategies increase MFI’s sustainability across their profitability.

Performance of Microfinance Institutions: Do Risk Management Regulations really matter?

The study was conducted to assess the impact of risk management regulations on the financial performance of Microfinance Institutions (MFIs) in Tanzania. Specifically, the study was guided by a descriptive research design. The target population of this study included Microfinance Institutions (Tier 1 Microfinance Institutions) in Tanzania where all three (3) MFIs were selected. The study employed secondary data collected from the MFIs yearly annual reports from 2019 to 2022 and Bank of Tanzania (BOT) published statistics on MFIs. The study used a panel data random effect model to establish the relationship between risk management regulations and MFIs financial performance. The study found capital adequacy ratio requirements (CAR) to statistically positively influence the financial performance of the MFIs while the cash reserve requirements (CRR) statistically negatively influence the financial performance of the MFIs and liquidity ratio requirements (LRR) do not significantly influence the financial performance of the MFIs.The study concluded that MFIs should continue adhering to the available policy and regulations so as to evade exposed risks. Moreover, in terms of capital adequacy and cash reserve requirements, the BOT should set minimum capital depending on the risk capabilities of the MFIs. Furthermore, our study recommended that BOT should ensure that all MFIs adhere to the written policy and procedures to mitigate the operational, financial, and strategic risks among the MFIs.

Fraud risk management and financial performance of microfinance institutions in Kenya

Fraud is a thorn in the flesh of many organizations in both local and global business ecosystems, more so in the financial sector because of the liquid nature of their services. To curb this menace, Financial Institutions including Microfinance institutions implemented fraud risk management practices. While larger financial institutions afford raft measures for curbing fraud, MFIs contend with less sophisticated practices in spite of them being the most susceptible to financial improprieties. Further, the determination of the overall effect of these practices on financial performance is critical in evaluating their success. The objective of this study therefore was to find out how fraud risk management practices affect the financial performance of Microfinance Institutions in Kenya. The study was anchored on the fraud management life cycle theory and focused on twelve deposit-taking Microfinance Institutions that were in operation in the Nairobi region of Kenya between 2016 to 2020. The study adopted a descriptive research design using cross-sectional data computed from the average financial results for five years 2016-2020. The study used purposive and stratified Random sampling methods to select a sample of 281 respondents from finance, ICT, operations, Audit, and Litigation managers and staff. The study used descriptive and inferential statistics to analyze the data. The results showed that fraud risk management positively and significantly affected financial performance by curbing incidents of fraud and concluded that to improve financial performance microfinance institutions should implement fraud risk management since they had a positive and significant effect on financial performance. The study recommended that firms should invest substantially in fraud risk management to reduce incidences of fraud and improve financial performance. Further, the management of Microfinance Institutions should continually evaluate and update their practices to keep abreast with the ever-changing fraud antics.

Entrepreneurial orientation and social performance of microfinance institutions in Indonesia

PurposeThe purpose of this research was to examine the influence of entrepreneurial orientation on social performance and the influence of social performance on financial performance of microfinance institutions (MFIs) in Indonesia. These tests use environmental dynamism as antecedents.Design/methodology/approachThe research was conducted on a sample of 235 CEOs/top leaders of MFIs spread across all provinces in Indonesia. Data collection used survey questionnaires. Data testing used SPSS version 25, and structural modeling used Amos version 25.FindingsThe findings show that entrepreneurial orientation significantly influences the social performance of MFIs in Indonesia. Entrepreneurial orientation does not influence financial performance but must go through social performance mediation. Social performance has a significant effect on financial performance. The importance of MFIs improves social performance (depth and breadth of reach) to improve financial performance.Practical implicationsMFIs need to increase social contribution and responsibility to improve social performance which will impact financial performance.Originality/valueEntrepreneurial orientation influence on financial performance goes through social performance. Social performance includes the depth of the reach to contribute to improving the quality of life of people experiencing poverty around the MFI's operations and the social responsibility of MFIs to the community through scholarships, free medical assistance, basic food assistance and building/renovating houses of worship and others.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-06-2023-0478

Relationship of Credit Risk and Profitability of Microfinance Institutions in Kenya

Microfinance institutions (MFIs) play a crucial role in offering financial services to marginalized and economically disadvantaged populations. However, these institutions face the challenge of credit risk, which has the potential to greatly impact their profitability and long-term viability. This study examined the relationship between credit risk and the financial performance of MFIs in Kenya. The study aims to investigate the connection between Capital Adequacy, Operational Efficiency, Interest Rate Spread, and the profitability of microfinance institutions in Kenya. The research utilizes a comprehensive dataset from 14 licensed and regulated MFIs in Kenya, covering the period from 2020 to 2022.The study utilized a research design based on census data. Secondary data was utilized. The Study examines the previous financial reports to find secondary data on performance. The data collected underwent analysis using both descriptive and inferential statistical tools. Given that the current study focused on the relationship study, a regression model was used as the analysis tool. The results obtained were then presented in the form of tables. The results of this study will benefit policy makers, managers, administrators, entrepreneurs, researchers, consultants, scholars, and trainers involved in strategic Microfinance Institutions. Results from the analysis suggest that the Kenyan microfinance sector encountered significant financial difficulties in the past. The profitability metrics, specifically return on assets (ROA) and return on equity (ROE), showed negative mean values of -8.89% and -8.72%, respectively. Based on the findings, it appears that MFIs incurred losses, as their assets and equity were not fully utilized. The study also discovered There is a strong positive relationship between Capital Adequacy and Operational Efficiency, as indicated by a correlation coefficient of 0.811. When Capital Adequacy increases, Operational Efficiency also increases, The correlation was highly significant, indicating a robust relationship. However, it is worth noting that there is a strong positive relationship between Capital Adequacy and Profitability Metrics, as indicated by a correlation coefficient of 0.961. Capital Adequacy has improved, leading to a significant increase in Profitability Metrics. The relationship between Operational Efficiency and Profitability Metrics was found to be highly positive, with a correlation coefficient of 0.875. The correlation between improved operational efficiency and higher profitability metrics is incredibly important. The relationship between Interest Rate Spread and Profitability Metrics has shown a strong positive correlation, with a correlation coefficient of 0.943. The profitability metrics were greatly impacted by the increased interest rate spread. The study found that it is recommended for Microfinance institutions in Kenya to diversify their income streams and give priority to improving credit risk management practices in order to effectively navigate the complexities of the sector. Additional research is needed to understand the factors that influence credit risk and profitability in the microfinance sector in Kenya.

Credit Risk Management on Financial Performance of Selected Microfinance Institutions

The purpose of this study was to look at the impact of credit risk management on the financial performance of a few Kenyan microfinance firms. The study's approach was a descriptive survey research design and a panel data analysis technique. The study comprised credit managers from all 52 Kenyan microfinance institutions registered in the Association of Microfinance Institutions in Kenya (AMFI) database. The study included all of the institutions that were targeted. The questionnaire, which had previously been tested on local microfinance banks in Kakamega County, was used to collect data. Data analysis included regression analysis and correlation. Throughout the data collection process, the researcher observed integrity. Tables were used to present the study's findings. According to the model summary, credit risk management accounts for 49.1% of the variance in the financial performance of Kenyan MFIs, while other factors not included in the study model account for the remaining 50.9%. With a p-value of 0.01 that is statistically significant. Multiple linear regression analysis revealed that a one-unit change in credit risk management resulted in a significant improvement of 0.672 units in microfinance institution performance (= 0.672 (0.087); at p.01). The study found that prudent and effective credit risk management boosts net profit margins, return on capital invested, and cash flow. The study adds to existing theories by emphasizing the importance of credit risk management in microfinance, lays the groundwork for future research, and advises Kenyan microfinance organizations to invest in efficient credit risk management to improve their financial performance. The report also suggests that studies on Savings and Credit Cooperative Societies (SACCOs) be conducted to compare study findings and that the Association of Microfinance Institutions do studies on non-registered microfinance across the country.

Effect of non-structural competition on the performance of microfinance institutions in sub-Saharan Africa

Effect of non-structural competition on the performance of microfinance institutions in sub-Saharan Africa

Strategic positioning and is it a useful construct in improving performance of microfinance institutions in Kenya

This paper aims to examine the effect of strategic leadership, resource allocation, information technology, customer focus, and differentiation on the performance of microfinance institutions in Nairobi City County. The study was founded on a resource-based view, dynamic capability and life-cycle theories. A target of 300 employees was targeted from which a sample of 172 research participants was recruited. The sample was selected through a combination of both stratified and sampling techniques. Questionnaires were used for primary data collection. Analysis used both descriptive and multiple regression analyses. The findings of the study indicated the urgency for microfinance organizations to adopt growth strategies that encompass innovative digital advancements, the introduction of novel products, innovation-focused strategies, and the digitization of services. The findings further highlighted the pivotal roles played by strategic positioning, strategic leadership, information technology integration, and differentiation in significantly shaping microfinance institutions’ performance. The findings also indicated that a unit enhancement of strategic positioning indicator had a significant enhancement on their individual performance. However, the effect of customer focus and resource allocation did not exhibit the same level of significance. The study recommended the reinforcement of strategic positioning, optimized resource allocation, embracing technological integration, and an unwavering focus on customer needs. The study recommended the exploration of diverse leadership styles, resource allocation strategies, and the undertaking of comparative analyses to draw insights into the effects of these factors on microfinance institutions.