Microfinancial Sector Assessment and Development

Niklis, Dimitrios; Baourakis, George; Zopounidis, Constantin

doi:10.1007/978-3-030-05423-6_6

Cited by 1 publication

(2 citation statements)

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“…Microfinance institutions (MFIs) are drivers of socio-economic development as they help alleviate poverty and promote entrepreneurial activities through access to cheap credit. MFIs strive to bridge the financing gap created by the traditional banking system by availing financial services to the unbanked and poor population considered “high-risk borrowers” (Niklis et al. , 2019).…”

Section: Institutional Setting and Review Of Literaturementioning

confidence: 99%

“…Institutional setting and review of literature 2.1 Overview of the global micro finance sector Microfinance institutions (MFIs) are drivers of socio-economic development as they help alleviate poverty and promote entrepreneurial activities through access to cheap credit. MFIs AJAR strive to bridge the financing gap created by the traditional banking system by availing financial services to the unbanked and poor population considered "high-risk borrowers" (Niklis et al, 2019). Over the decades MFIs have generated considerable enthusiasm that culminated in the Nobel Peace Prize award to Muhammad Yunus and the GB in 2006 (Nawaz, 2019).…”

Section: Introductionmentioning

confidence: 99%

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Does intellectual capital matter to MFIs’ financial sustainability?

Githaiga

Soi

Buigut

2022

AJAR

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PurposeThis paper examines the effect of intellectual capital (IC) on the financial sustainability of microfinance institutions (MFIs). The study is motivated by the increased calls for MFIs to be self-sustainable and the growing importance of knowledge-based assets as contributors of competitive advantage and sustained performance.Design/methodology/approachWith a global sample of 444 MFIs and data for 2013–2018, which yielded 2,664 MFIs-year observations, this study examines the effect of IC on MFIs’ financial sustainability. The data are extracted from the MIX Market database. Value added intellectual capital coefficients are used as proxy measures of IC. Operational self-sufficiency is used to measure financial sustainability. Data are analyzed using three-panel data estimation models: the fixed effect, the random effect and the dynamic panel system generalized method of moments.FindingsThe results show that human capital efficiency and capital employed efficiency have a positive and significant effect on the financial sustainability of MFIs. However, structural capital efficiency has a significantly negative effect on financial sustainability. These results confirm the relative importance of both tangible and intangible assets as important positive contributors of financial sustainability of MFIs.Research limitations/implicationsThe paper focused on the association between IC and financial sustainability of MFIs. Therefore, examining nonfinancial institution may validate the contributions of this study.Practical implicationsBased on the findings, MFIs’ managers are encouraged to leverage IC, physical and financial capital to attain financial sustainability. In particular, MFIs should invest in employees training and development. Additionally, owing to the positive relationship between physical capital and financial sustainability, there is need for policy interventions to ensure MFIs access adequate funding. The study further recommends mandatory disclosure of IC among MFIs.Originality/valueThis is the first paper to investigate the relationship between IC and the financial sustainability of MFIs using panel data and a global sample of MFIs; therefore, it lays an empirical ground for future studies.

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Section: Institutional Setting and Review Of Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%