In particular, the contributions provide answers to the following two main questions. Proactive risk management is essential to the longterm sustainability of microfinance institutions mfis, but many microfinance stakeholders are unaware of the various components of a comprehensive risk management regimen. Sustainability of microfinance institutions in financial crisis. Financial sustainability and microfinance institutions from. Objectives of the study the general objective of the study was to.
Keywords microfinance, financial sustainability, poverty alleviation, mission drift. This study investigates the financial sustainability and outreach of. This means that sustainability of a microfinance institution itself is a measure of how effectively it operates and serves the poorat the same time. The multiple regression technique was used to measure financial sustainability with the given determinants. Pdf financing and financial sustainability of microfinance.
Repayment rate is a common indicator used to measure financial sustainability of mfis. We understand that the microfinance industry is evolving, and. This study investigates the impact of corporate governance on financial sustainability of microfinance institutions in nigeria during the period, 2011 to 2015. Sustainability is a key issue, and something that many of the microfinance investment vehicles are attempting to address with their partner mfis. Unitus seems to be taking the positive deviance approach. This paper focuses on clarification of sustainability of microfinance institutions during financial crisis. Since capital constraints have hindered the expansion of micro. These transactions are typically of smaller amounts and shorter tenure than corporate loans and target small business owners or commercial clients whose operations. The study recommends that the microfinance institutions in. Investors in microfinance because of their interest in microfinance is the rate of return. In the last few years, considerable attention has been paid to microfinance as a relevant participant in the formal financial system, whose target audience is people who are otherwise at risk of financial exclusion.
The paper examines the effect of regulation on microfinance institutions mfis sustainability and outreach in sub. Microfinance sector, and reduce by the year 2015 in the private sector will dominate. The study found that there is a significant but negative relationship between governance, donor financing, saving mobilization and financial sustainability of microfinance institutions in mombasa county. The financial sustainability of microfinance institutions mfis is crucial for the continual existence of the microfinance industry. It is the questions of how able are microfinance institutions to continue with operations in the future without depending on subsidies from. Among other things, this increased focus on financial sustainability and efficiency is due to a number of developments the microfinance business has been recently confronted with, such as the increasing competition among mfis, the commercialization of microfinance i. As a result, emphasis has been placed on the financial sustainability of mfis over the past few years. Key success drivers for microfinance institutions in zimbabwe.
Pdf sustainability of microfinance institutions in. Takeaways from the seif impact investing congress 2017. Using aggregate quarterly financial statements data from march 2006 to december 2017, the autoregressive distributed lags technique was employed to examine cointegration and adjustments to longrun equilibrium properties of the data. In the literature, microfinance institutions mfis seem to be understood as financial organiza tions engaged primarily in the business of giving smallscale loans and financial amenities to poor and financially unbankable customers, while also devising the key element of a double bottom. Analysis of financial performance and sustainability of. We model financial sustainability measurement through the use of return on assets roa.
Financial sustainability is defined as the development of products and delivery systems that meet client needs, at prices that cover all costs of providing these. Abstract this research is about analysing the determinants of financial and operations sustainability of microfinance institutions in rwanda, particularly the case study of clecam. This presents an empirical gap, which necessitates an investigation on the factors influencing financial sustainability of micro finance institution s in kenya. Microfinance emerged as an approach with great potential for alleviating poverty and improving access to financial services by offering small loans with no. A risk management framework for microfinance institutions. Factors influencing mfi sustainability descriptives. Using unbalanced panel data from 2002 to 2012 for 30 countries and a multilevel estimation technique, we find that regulation helps improves the sustainability and breadth of outreach but not the depth. Microfinance institutions mfis increasingly insist on financial sustainability as a core element of their business strategy, since it has been an alarming challenge across many mfis globally. Sustainability free fulltext microfinance institutions.
The road to sustainability is quite a tough and challenging. Financial sustainability of rural microfinance institutions. As per the mix market definition the term financial sustainability is defined as having an operational sustainability level of 110% or more, whileoperational. These mfis are kwft, faulu kenya, cardet, smep and yehu. Microfinance institutions mfis target the poor through. The determinants of financial and operational sustainability.
Pdf sustainability of microfinance institutions in financial crisis. The new microfinance handbook fills a critical gap in the current literature on financial inclusion. The study employed descriptive survey research design. Data were collected from 25 microfinance institutions of their annual reports from 20082015. Microfinance has become crucial to ghanas financial system over the last three decades. Poor people, particularly poor women, are excellent borrowers, when provided with efficient, responsive loan services at commercial rates. Microfinance institutions mfis have attracted great attention, due to their significant role in poverty reduction. Microfinance is a type of banking service that is provided to unemployed or lowincome individuals or groups who have no alternative source to gain financial support. Microfinance institutions and other issues affecting their operations especially in kenya. This study investigates the performances of financial selfsustainability of. Factors influencing sustainability of microfinance. But despite these achievements, there is still a long way to go to extend access to all who need financial services. Microfinance has been accepted as a tool for poverty alleviation and financial inclusion in most of the countries. Regulation, outreach, and sustainability of microfinance.
Consequently, the factors affecting their financial sustainability are. However, no such study has been conducted in rural tanzania where majority of mfis are small, most of which are memberbased cooperatives. The purpose of this paper is to identify those factors that have significant impact on financial sustainability of microfinance institutions in pakistan. Sustainability and governance of microfinance institutions. Sustainability, profitability and outreach tradeoffs. In this paper, we seek to better understand the implications for providers of microfinance in pursuing such a strategy. This hinders microfinance institutions ability to expand their service to the very poor or extremely poor communities. Factors affecting the performance of microfinance institutions in uganda a case study of hofokam limited andrew katusabe doctoral thesis dissertation business economics banking, stock exchanges, insurance, accounting publish your bachelors or masters thesis, dissertation, term. Financial sustainability of microfinance institutions sage journals. The aim of the study was to gain a better understanding of the factors, which are critical to their sustainability. Sustainability and efficiency of microfinance institutions in south asia 99 the study of conning 1999 deals with the contract design problem facing microfinancelending organizations that want to maximize the impact and outreach of their lending activities to a target population of poor borrowers while remaining financially sustainable. The research was guided by liquidity preference theory, theory of inflation rate, and exchange rate parity theory.
The first category consists of microfinance institutions that fail in both lending and. To study the factors affecting financial sustainability of microfinance institutions. The sustainability and outreach performance of ethiopian 50 1. The implications of financial sustainability in the microfinance. The purpose of this paper is to identify those factors that have significant impact on financial sustainability of microfinance. Lastly, the study documents the applicability and limitations of previous studies to rural microfinance institutions in tanzania. Interest rate caps and sustainability of microfinance. The sustainability and outreach of microfinance institutions. Pdf the aim of this paper is to clarify the problems of microfinance and the sustainability of microfinance institutions mfi in financial crisis. Financial sustainability is critical to the growth of microfinance institutions and therefore deserves proper attention by relevant stakeholders. Because social development is part of their mandate, microfinance institutions are concerned with the environmental and social risks of their transactions and are taking steps to manage these risks to reduce negative impacts in their communities. They target the financially excluded and poverty stricken population with micro financial products, empowering the poor to create livelihoods for themselves and by so doing contributing towards the economic growth of the country.
Pdf on sep 1, 2011, saundarjya borbora and others published microfinance institutions. Dec 20, 2006 in this paper, we seek to better understand the implications for providers of microfinance in pursuing such a strategy. Apart from being a business proposition, providing microfinance services also fits into our sustainability objectives. Sustainability and outreach find, read and cite all the research you. Key success drivers for microfinance institutions in.
The study further concludes that the major challenges facing microfinance institutions in kenya re funding, repayment default and government regulations. For microfinance institutions, sustainability is meeting goals now and in the long term 31. This study adopted census where all the 49 mfis operating in nairobi county. Microfinance institutions mfis work to increase social sustainability by providing more services to particular clientele, while maintaining the financial and operational sustainability of the institutions. Background the microfinance institutions selected in this report can be grouped into five categories robinson, 2003. A microfinance institutions exposure to environmental and social risks is typically low. Different literatures noted that financial sustainability is one of the areas that we need to look at to assess the performance of micro finance institutions. Apart from poverty alleviation which is the prominent mission of microfinance institutions mfis, mfis also need to maintain their financial sustainability to assure that they will have working capital in the next period. Microfinance financial sustainability and outreach. Environmental shocks and sustainability in microfinance. Sustainability and efficiency of microfinance institutions. Specifically, the study aimed at establishing various factors influencing sustainability of microfinance institutions within the town. Microfinance institutions provide financial services, such as loans, to lowincome clients, including microcompanies and the selfemployed, who traditionally lack access to finance. I am particularly pleased with the explicit focus on consumers and their needsthis, together with the onset of technologybased delivery models, has been the most important shift in the microfinance field over the past 15 years.
Given the features of mfis, this paper proposes a novel hybrid model of soft set theory, and an improved order preference by similarity to ideal solution hmsit to evaluate the sustainability of mfis, considering accounting ratios, corporate governance factors, and macro. In parallel, sustainability and the promotion of sustainable development sd are imposed as the theoretical frame when facing any study. The study recommends that the microfinance institutions in kenya need to. Performance and sustainability of microfinance institutions in tanzania. May 14, 2019 the financial sustainability of microfinance institutions mfis is crucial for the continual existence of the microfinance industry. Factors influencing the financial sustainability of selected microfinance institutions 3 2. Factors affecting financial sustainability of microfinance. Pdf corporate governance and financial sustainability of. Factors influencing the financial sustainability of selected. However, with the primary goal of the industry being the attainment of social outreach, the emphasis on financial sustainability has raised concerns about a. Factors affecting the performance of microfinance institutions in uganda a case study of hofokam limited andrew katusabe doctoral thesis dissertation business economics banking, stock exchanges, insurance, accounting publish your bachelors or masters thesis, dissertation, term paper or essay. This document presents a framework for internal risk management systems and processes of microfinance institutions. To create a financial sustainability index for the microfinance sector.
Sustainability in microfinance institutions is geared towards ensuring continuous operations of the institutions in the future, when donors and developing partners are not able to provide funds for operations. Literature shows that the history and track record of management is critical for the growth and sustainability of microfinance institutions. This study investigates the financial sustainability and outreach of 32 mfis in india in terms of interest rate and default rate. Financial sustainability and microfinance institutions. In recent years, there have been reported cases of the collapse of several. Evaluating the sustainability of microfinance institutions. Microfinance institutions can provide microloans to poor people in an efficient and. This paper focuses on clarification of sustainability of. I am particularly pleased with the explicit focus on consumers and their needsthis, together with the onset of technologybased delivery models, has been the most important. A case of selected saccos in mtwara municipal, and hereby recommends for acceptance by the senate of the open university of tanzania in partial fulfillment of the award of degree of masters in business administration finance.
Ultimately, the goal of microfinance is to give low income peoples an opportunity to become selfsufficient for their entrepreneurship development. Factors influencing the financial sustainability of. The role of microfinance institutions george kwadwo anane university of energy and natural resources, sunyanighana patrick brandful cobbinah school of environmental sciences, institute for land, water and society, charles sturt university, alburywodonga, australia. Abstract this research is about analysing the determinants of financial and operations sustainability of microfinance institutions in rwanda, particularly the case study of clecamejoheza ltd. The question of sustainability for microfinance institutions. Importance of microfinance in sustainable development. This entry was posted in conferencesymposium, empowering people, impact investments, innovative partnerships, microfinance investments, microfranchising, social entrepreneurship, sustainability, venture philanthropy on april 12, 2017 by microfinance. We also work with many organizations on pro bono initiatives in the fields of microfinance.