Developing sustainability index of microfinance institutions in Pakistan

Despite the importance of sustainable microfinance institutions (MFIs) in alleviating poverty, the measurement of sustainability is still under debate. This study aims to develop an index that measures the sustainability of MFIs in Pakistan based on a double bottom line approach. Principal Component...

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Main Author:	Saad, Muhammad
Format:	Thesis
Language:	eng eng eng eng
Published:	2019
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/8391/1/depositpermission_s900452.pdf https://etd.uum.edu.my/8391/4/s900452%20references.docx https://etd.uum.edu.my/8391/6/s900452_01.pdf https://etd.uum.edu.my/8391/7/s900452_02.pdf
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id	my-uum-etd.8391
record_format	uketd_dc
spelling	my-uum-etd.83912021-06-24T03:56:54Z Developing sustainability index of microfinance institutions in Pakistan 2019 Saad, Muhammad Mohd. Taib, Hasniza Bhuiyan, Abul Bashar School of Economics, Finance & Banking School of Economics, Finance & Banking HG Finance Despite the importance of sustainable microfinance institutions (MFIs) in alleviating poverty, the measurement of sustainability is still under debate. This study aims to develop an index that measures the sustainability of MFIs in Pakistan based on a double bottom line approach. Principal Component Analysis (PCA) is employed to assign weights to individual indicators that are further used to compute the sustainability score of MFIs in Pakistan for the period 2006-2015. The weights assigned to individual indicators of financial self-sufficiency (FSS), operational self-sufficiency (OSS), average loan balance per borrower (ALPB) and a number of active borrowers (NAB) are 0.6643, 0.6607, -0.1905 and 0.2931 respectively. The positive values for weights indicate that any increase in FSS, OSS, and NAB will cause incremental sustainability scores of MFIs, whereas, an increase in ALPB will cause a reduction in sustainability scores of MFIs. The determinants of sustainability are also identified using Fixed Effect Regression. Results suggest that return on asset (ROA), return on equity (ROE), borrower per staff member (BPSM) and gross loan portfolio (GLP) have a significant effect on the sustainability of MFIs. Results found in the moderated model, using age and size as proxies of life cycle theory, further suggest that age significantly moderates the relationship between ROE, portfolio at risk greater than 30 days (PAR>30), BPSM, debt to equity ratio (DER), GLP and sustainability of MFIs. Moreover, size significantly moderates the relationship between ROA, BPSM, and sustainability of MFIs. A composite measure of sustainability developed in this study is helpful for managers to evaluate MFIs in pursuit of their efforts to achieve the double bottom line. Findings further suggest that over the life cycle of MFIs, managers need to mainly focus on ROA, ROE, and BPSM, along with PAR>30, DER and GLP to attain sustainability. 2019 Thesis https://etd.uum.edu.my/8391/ https://etd.uum.edu.my/8391/1/depositpermission_s900452.pdf text eng staffonly https://etd.uum.edu.my/8391/4/s900452%20references.docx text eng public https://etd.uum.edu.my/8391/6/s900452_01.pdf text eng public https://etd.uum.edu.my/8391/7/s900452_02.pdf text eng public other doctoral Universiti Utara Malaysia
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng eng eng
advisor	Mohd. Taib, Hasniza Bhuiyan, Abul Bashar
topic	HG Finance
spellingShingle	HG Finance Saad, Muhammad Developing sustainability index of microfinance institutions in Pakistan
description	Despite the importance of sustainable microfinance institutions (MFIs) in alleviating poverty, the measurement of sustainability is still under debate. This study aims to develop an index that measures the sustainability of MFIs in Pakistan based on a double bottom line approach. Principal Component Analysis (PCA) is employed to assign weights to individual indicators that are further used to compute the sustainability score of MFIs in Pakistan for the period 2006-2015. The weights assigned to individual indicators of financial self-sufficiency (FSS), operational self-sufficiency (OSS), average loan balance per borrower (ALPB) and a number of active borrowers (NAB) are 0.6643, 0.6607, -0.1905 and 0.2931 respectively. The positive values for weights indicate that any increase in FSS, OSS, and NAB will cause incremental sustainability scores of MFIs, whereas, an increase in ALPB will cause a reduction in sustainability scores of MFIs. The determinants of sustainability are also identified using Fixed Effect Regression. Results suggest that return on asset (ROA), return on equity (ROE), borrower per staff member (BPSM) and gross loan portfolio (GLP) have a significant effect on the sustainability of MFIs. Results found in the moderated model, using age and size as proxies of life cycle theory, further suggest that age significantly moderates the relationship between ROE, portfolio at risk greater than 30 days (PAR>30), BPSM, debt to equity ratio (DER), GLP and sustainability of MFIs. Moreover, size significantly moderates the relationship between ROA, BPSM, and sustainability of MFIs. A composite measure of sustainability developed in this study is helpful for managers to evaluate MFIs in pursuit of their efforts to achieve the double bottom line. Findings further suggest that over the life cycle of MFIs, managers need to mainly focus on ROA, ROE, and BPSM, along with PAR>30, DER and GLP to attain sustainability.
format	Thesis
qualification_name	other
qualification_level	Doctorate
author	Saad, Muhammad
author_facet	Saad, Muhammad
author_sort	Saad, Muhammad
title	Developing sustainability index of microfinance institutions in Pakistan
title_short	Developing sustainability index of microfinance institutions in Pakistan
title_full	Developing sustainability index of microfinance institutions in Pakistan
title_fullStr	Developing sustainability index of microfinance institutions in Pakistan
title_full_unstemmed	Developing sustainability index of microfinance institutions in Pakistan
title_sort	developing sustainability index of microfinance institutions in pakistan
granting_institution	Universiti Utara Malaysia
granting_department	School of Economics, Finance & Banking
publishDate	2019
url	https://etd.uum.edu.my/8391/1/depositpermission_s900452.pdf https://etd.uum.edu.my/8391/4/s900452%20references.docx https://etd.uum.edu.my/8391/6/s900452_01.pdf https://etd.uum.edu.my/8391/7/s900452_02.pdf
_version_	1747828384126205952

Developing sustainability index of microfinance institutions in Pakistan

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