| Abstrakt: |
Financial sustainability is one of the major issues in the development process, particularly in developing countries. Microfinance started with two basic objectives of poverty reduction and women empowerment. However, unsustainable microfinance providers cannot assist the poor for a longer period of time, due to uncertainty about their existence. This study investigates that how financial sustainability of Pakistan's microfinance sector is affected by various factors. A new financial sustainability index has been developed to measure the financial sustainability. Generalized Method of Moments (GMM) approach is employed to analyze the panel data from 34 Pakistani MFPs, yielding 344 MFI-years of observations from 2006 to 2018. The findings reveal that increase in loan size, female borrowers, liquidity, and leverage significantly enhances the financial viability of Microfinance Providers in Pakistan. However, the total borrowers and the operating cost per borrower negatively affect the financial sustainability of MFPs in Pakistan. MFIs needs to be financially independent, with less or no support from government or donor agencies. Financially sustainable MFPs contributes in the achievement of the 8 out of 17 Sustainable Development of Goals (2030 SDGs) of the United Nation. The data for 2018 onwards is seriously affected by COVID-19, which cannot be included in the current data set. Hence, researchers in future analyze the data from the pre-COVID-19 and post-COVID-19 periods to compare the analysis and examine the pandemic's impact. Plain language summary: This study investigated the relationship between organizational structure, growth outreach, women's empowerment, liquidity, capital structure, cost efficiency, and financial stability using data from 34 MFPs in Pakistan over the 2006–2018 periods. The financial sustainability index was developed using principal component analysis and was used as a proxy of financial sustainability. ROA, ROE, OSS, and FSS were used as components for developing the financial sustainability index. Due to the inclusion of lagged dependent variables as part of explanatory variables for the persistency of the estimates, the model becomes dynamic. Hence, the Generalized Method of Moment (GMM) is arguably the right regressor for estimating the dynamic panel data. Organizational structure has a significant positive impact on the microfinance sector of Pakistan. Proxies for measuring growth outreach: the average loan per borrower has a significant positive impact, and the number of active borrowers has a negative effect on FSI in Pakistan. The percentage of women borrowers significantly positively impacts FSI in Pakistan. Liquidity has a significant positive effect on FSI in the Pakistan context. The capital structure (D/E) has a significant positive impact on FSI in the microfinance sector of Pakistan. The cost per borrower has a significant negative impact on the financial sustainability of the microfinance sector of Pakistan. The control variable MFP size also has a significant positive effect on FSI in the microfinance sector of Pakistan. GDP growth negatively affects FSI in the Pakistani context. [ABSTRACT FROM AUTHOR] |
