DETERMINANTS OF FINANCIAL SELF-RELIANCE AMONG MICROFINANCE INSTITUTIONS IN BANGLADESH

Abstract

The financial sustainability of microfinance institutions (MFIs) is crucial for the success of microfinance. This study aimed to analyze the financial self-reliance of MFIs in Bangladesh and identify its determinants. The study employed return on assets (ROA) as a proxy for financial self-reliance, covering both profit margin and efficiency of MFIs. Data from 60 MFIs from 2015 to 2020 were used. The study identified firm-level and country-level determinants of the financial performance of the sample MFIs in Bangladesh. Results showed that ROA had a positive relationship with firm size, experience, management efficiency, number of active borrowers, and gross loan portfolio, while having a negative relationship with the debt-equity ratio. Inflation rate, real interest rate, and GDP growth rate were found to be significant country-level independent variables. The study recommended that Bangladesh's NGO MFIs focus on increasing their profitability by achieving experience, improving managerial efficiency, selecting the right number of active borrowers, and enlarging the magnitude of loans. This study contributes to the current literature on the financial self-reliance of MFIs in Bangladesh and could be extended by including more variables