Depth of Outreach and Financial Sustainability of Microfinance Institutions: An Empirical Revisit

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Author(s): Mohammad Zainuddin (Putra Business School, Universiti Putra Malaysia, Malaysia), Ida Md. Yasin (Putra Business School, Universiti Putra Malaysia, Malaysia), Masnun Mahi (Faculty of Business and Administration, University of Malaya, Malaysia)and Shabiha Akter (Taylor's Business School, Taylor's University, Malaysia)
Copyright: 2023
Pages: 15
Source title: Research Anthology on Microfinance Services and Roles in Social Progress
Source Author(s)/Editor(s): Information Resources Management Association (USA)
DOI: 10.4018/978-1-6684-7552-2.ch018

Keywords: Accounting & Finance / Accounting and Finance / Business & Management / Business Science Reference

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Abstract

Microfinance institutions tend to rely on donations and subsidies to achieve their social objective of outreach to the poor. Over the years, the industry has experienced tremendous growth, with donor funding pouring in. The question, however, arises whether microfinance firms can operate and continue to serve the poor clients on cost-covering basis without ongoing subsidies. There has been a growing tendency in the industry, which was traditionally a domain of not-for-profits, to embrace commercialization and pursue profitability to ensure self-sustainability. This chapter makes an empirical revisit to an inconclusive research question: Is there a trade-off between microfinance outreach and sustainability? Based on data for 1,232 microfinance firms from 43 countries, the study confirms the existence of trade-off between the two bottom lines of microfinance.

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Depth of Outreach and Financial Sustainability of Microfinance Institutions: An Empirical Revisit

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