The determinants of outreach and profitability in MFI´s: a structural equation approach

Abstract

The main objective of this study is to analyze the relationship between the financial performance and scope of MFIs with independent variables such as: country environment, MFI size, expenses, and capital structure. The Structural Equations Modeling (SEM) was used to verify direct and indirect relationships. It was found that the effect of these independent variables shows through operating expenses. Additionally, it was found that in a country with high levels of corruption, absence of rule of law, and government inefficiencies, MFIs are less likely to achieve their objectives due to the high operating costs allocated to reaching the population with low income. These factors also explain the financial performance and scope of MFIs, implying that operating expenses explain two of the most important determinants of MFI mission bias. The originality of this work resides in the methodology employed, the construction of all indicators and use of the regulatory environment, and the institutional development variables to analyze MFIs.

An integrated framework for analysing performance indicators of Indian microfinance institutions: a multi-stakeholder perspective

“…The quantitative assessment of the MFI's performance dimensions and indicators considering the underlying dyadic relationship between them is a complex decisionmaking problem. Multivariate statistical method such as regression analysis and partial least square structural equation modelling (PLS-SEM) have been used in the existing literature to model the complex relationship between the contributing factors/dimensions (Blanco-Oliver and Irimia-Di eguez, 2019; Rocha et al, 2019). However, the major disadvantages of these statistical techniques are the need for fulfilment of the preliminary assumptions about the data and/or experiment and the requirement of minimum sample size (Abdullah et al, 2019).…”