Sustainability of microfinance institutions in the Philippines
DOI:
https://doi.org/10.24200/jonus.vol8iss3pp43-61Abstract
Background and Purpose: Microfinance is the most effective and widely acknowledged method of poverty alleviation across the globe, but these days, every so and often, the MFIs are digressing from their primary mission under the pretext of financial and operational sustainability of the organizations. This research aims to confirm the adherence to double bottom-line sustainability of Microfinance institutions (MFIs) and further identify the determinants of MFIs sustainability in the Philippines.
Methodology: The sample for the study was obtained from the MIX- market for the period 1999-2018. Principal component analysis and the KU model are used to measure the sustainability scores of MFIs. Later, a panel regression model is applied to identify the determinants of sustainability.
Findings: MFIs do not adhere to the double bottom line sustainability as most MFIs were unsustainable at different benchmarks set for the study. Sustainability can be achieved if MFIs start utilizing their assets and focus on improving their efficiency and portfolio quality. MFIs size also significantly influences their sustainability.
Contributions: This study highlights the need for policymakers and regulators to develop a regulatory framework to reduce operating costs and improve the portfolio quality of MFIs in the Philippines. They should also provide guidelines that would help MFIs improve their asset utilization ratio as it would help them adhere to double bottom line sustainability.
Keywords: Sustainability, microfinance, double bottom line, outreach, financial sustainability.
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