Interaction and higher order effects of factors affecting the performance of microfinancing institutions

Interaction and higher order effects of factors affecting the performance of microfinancing... PurposeThe purpose of this paper is to find the factors that affect the “performance” of microfinancing institutions (MFIs) around the world and to further analyse the interaction and higher order effects of these factors on the performance. Although MFIs can have various objectives from a commercial focus to a social focus when performing their operations, this study analyses the factors that contribute to “performance” of MFIs in relation to their ability to “alleviate poverty in a sustainable manner”.Design/methodology/approachBased on the data relating to 234 MFIs across 63 countries, this study analyses eight factors that can affect performance of MFIs (as defined in this study) and their higher order and interaction effects using multiple regression models.FindingsThe results show that gender (female), literacy level of the borrowers, operational efficiency, offering only loans (not diversifying), age and emphasis on profitability have a significant effect on the performance. Analysis of higher order effects shows that the relationship of age with performance is a downward concave curve and that with operational efficiency is an upward concave curve. The interaction effects of gender and literacy, age and emphasis on female borrowers, and also age and emphasis on profitability were found to be significant.kOriginality/valueThe findings contribute to understanding the factors that affect the performance of MFIs to alleviate poverty in a sustainable manner and help the policy makers and managers of MFIs to improve their performance in this area. Considering the hundreds of millions of dollars injected into microfinancing, improvement in performance as a result of these findings can lead to savings in millions of dollars. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Social Economics Emerald Publishing

Interaction and higher order effects of factors affecting the performance of microfinancing institutions

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0306-8293
DOI
10.1108/IJSE-12-2014-0251
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to find the factors that affect the “performance” of microfinancing institutions (MFIs) around the world and to further analyse the interaction and higher order effects of these factors on the performance. Although MFIs can have various objectives from a commercial focus to a social focus when performing their operations, this study analyses the factors that contribute to “performance” of MFIs in relation to their ability to “alleviate poverty in a sustainable manner”.Design/methodology/approachBased on the data relating to 234 MFIs across 63 countries, this study analyses eight factors that can affect performance of MFIs (as defined in this study) and their higher order and interaction effects using multiple regression models.FindingsThe results show that gender (female), literacy level of the borrowers, operational efficiency, offering only loans (not diversifying), age and emphasis on profitability have a significant effect on the performance. Analysis of higher order effects shows that the relationship of age with performance is a downward concave curve and that with operational efficiency is an upward concave curve. The interaction effects of gender and literacy, age and emphasis on female borrowers, and also age and emphasis on profitability were found to be significant.kOriginality/valueThe findings contribute to understanding the factors that affect the performance of MFIs to alleviate poverty in a sustainable manner and help the policy makers and managers of MFIs to improve their performance in this area. Considering the hundreds of millions of dollars injected into microfinancing, improvement in performance as a result of these findings can lead to savings in millions of dollars.

Journal

International Journal of Social EconomicsEmerald Publishing

Published: Jul 10, 2017

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