Determinants of financial sustainability of microfinance institutions in Pakistan

Since Pakistan achieved independence, poverty has become one of the most important issues in the country, which can be reduced with the help of microfinance sector. Pakistani microfinance institutions (MFIs) are facing a decline in profitability which makes it difficult for them to survive. The cur...

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Autores principales:	Naz F., Salim S., Rehman R., Ahmad M.I, Ali R.
Formato:	article
Lenguaje:	RU
Publicado:	Ural State University of Economics 2019
Materias:	public administration sustainability profitability outreach microfinance microfinance institution Pakistan Business HF5001-6182 Finance HG1-9999
Acceso en línea:	https://doaj.org/article/53297bc600ed47a6bc5b613466edbd08
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spelling	oai:doaj.org-article:53297bc600ed47a6bc5b613466edbd082021-12-02T09:45:59ZDeterminants of financial sustainability of microfinance institutions in Pakistan10.29141/2218-5003-2019-10-4-52218-5003https://doaj.org/article/53297bc600ed47a6bc5b613466edbd082019-09-01T00:00:00Zhttp://upravlenets.usue.ru/images/80/5.pdfhttps://doaj.org/toc/2218-5003 Since Pakistan achieved independence, poverty has become one of the most important issues in the country, which can be reduced with the help of microfinance sector. Pakistani microfinance institutions (MFIs) are facing a decline in profitability which makes it difficult for them to survive. The current study aims to investigate the determinants affecting the financial performance, i.e. profitability and sustainability of microfinance institutions in Pakistan, as well as to establish if attaining profitability and sustainability becomes a conflicting goal in serving the poorer strata. The paper utilizes an unbalanced panel data set of 29 MFIs for the period 2008–2014 obtained from MIX Market. The study uses fixed effect and random effect with later accounting for endogeneity through instrumental variables technique i-e 2SLS and 3SLS. The results reveal that MFIs’ size, cost efficiency, portfolio at risk, average loan size and yield on loan portfolio are the main factors influencing the financial performance of MFIs in Pakistan. No sign of mission drift has been found rather serving to the poor is seen to be an increment for financial performance. The study provides guidance to MFIs’ managers in determining the factors that could affect their financial performance and reaching foremost objectives of any MFI. Managers can get an idea how to achieve both goals simultaneously. To the authors knowledge, this is the first study concentrated specifically on Pakistan in determining performance and outreach factors to date considering the simultaneous causation adopting two-stage least square (2SLS) and three-stage least square (3SLS) estimation strategy.Naz F. Salim S.Rehman R.Ahmad M.IAli R. Ural State University of Economicsarticlepublic administrationsustainabilityprofitabilityoutreachmicrofinancemicrofinance institutionPakistanBusinessHF5001-6182FinanceHG1-9999RUУправленец, Vol 10, Iss 4, Pp 51-64 (2019)
institution	DOAJ
collection	DOAJ
language	RU
topic	public administration sustainability profitability outreach microfinance microfinance institution Pakistan Business HF5001-6182 Finance HG1-9999
spellingShingle	public administration sustainability profitability outreach microfinance microfinance institution Pakistan Business HF5001-6182 Finance HG1-9999 Naz F. Salim S. Rehman R. Ahmad M.I Ali R. Determinants of financial sustainability of microfinance institutions in Pakistan
description	Since Pakistan achieved independence, poverty has become one of the most important issues in the country, which can be reduced with the help of microfinance sector. Pakistani microfinance institutions (MFIs) are facing a decline in profitability which makes it difficult for them to survive. The current study aims to investigate the determinants affecting the financial performance, i.e. profitability and sustainability of microfinance institutions in Pakistan, as well as to establish if attaining profitability and sustainability becomes a conflicting goal in serving the poorer strata. The paper utilizes an unbalanced panel data set of 29 MFIs for the period 2008–2014 obtained from MIX Market. The study uses fixed effect and random effect with later accounting for endogeneity through instrumental variables technique i-e 2SLS and 3SLS. The results reveal that MFIs’ size, cost efficiency, portfolio at risk, average loan size and yield on loan portfolio are the main factors influencing the financial performance of MFIs in Pakistan. No sign of mission drift has been found rather serving to the poor is seen to be an increment for financial performance. The study provides guidance to MFIs’ managers in determining the factors that could affect their financial performance and reaching foremost objectives of any MFI. Managers can get an idea how to achieve both goals simultaneously. To the authors knowledge, this is the first study concentrated specifically on Pakistan in determining performance and outreach factors to date considering the simultaneous causation adopting two-stage least square (2SLS) and three-stage least square (3SLS) estimation strategy.
format	article
author	Naz F. Salim S. Rehman R. Ahmad M.I Ali R.
author_facet	Naz F. Salim S. Rehman R. Ahmad M.I Ali R.
author_sort	Naz F.
title	Determinants of financial sustainability of microfinance institutions in Pakistan
title_short	Determinants of financial sustainability of microfinance institutions in Pakistan
title_full	Determinants of financial sustainability of microfinance institutions in Pakistan
title_fullStr	Determinants of financial sustainability of microfinance institutions in Pakistan
title_full_unstemmed	Determinants of financial sustainability of microfinance institutions in Pakistan
title_sort	determinants of financial sustainability of microfinance institutions in pakistan
publisher	Ural State University of Economics
publishDate	2019
url	https://doaj.org/article/53297bc600ed47a6bc5b613466edbd08
work_keys_str_mv	AT nazf determinantsoffinancialsustainabilityofmicrofinanceinstitutionsinpakistan AT salims determinantsoffinancialsustainabilityofmicrofinanceinstitutionsinpakistan AT rehmanr determinantsoffinancialsustainabilityofmicrofinanceinstitutionsinpakistan AT ahmadmi determinantsoffinancialsustainabilityofmicrofinanceinstitutionsinpakistan AT alir determinantsoffinancialsustainabilityofmicrofinanceinstitutionsinpakistan
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Determinants of financial sustainability of microfinance institutions in Pakistan

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