The sustainability of microfinance institutions in Pakistan: empirical issues and challenges Online publication date: Fri, 06-Jan-2023
by Muhammad Saad; Hasniza Mohd Taib; Abul Bashar Bhuiyan; Rashid Bhutta
International Journal of Trade and Global Markets (IJTGM), Vol. 16, No. 1/2/3, 2022
Abstract: The sustainability of microfinance institutions (MFIs) is important not only for the institution itself but also for the overall economy because of its contribution to poverty reduction. The purpose of this paper is to identify the factors that influence the sustainability of MFIs in Pakistan. Using unbalanced panel data of MFIs from Pakistan for the year 2006-2015. Fixed effect regression is used to identify factors that influence sustainability. Additionally, the Granger causality test is applied to check for the possible reverse causation effect of each and all variables. Results suggest that return on assets and borrower per staff member are the key determinants of sustainability. The findings of this study will help practitioners and regulators to enhance the effectiveness of MFIs. This study is an initial attempt to study the influence of factors identified by the Consultative Group to Assist Poor (CGAP) and Micro Rate on the sustainability of MFIs.
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