Determinants of Profitability in Microfinance Institutions: A Case Study of Pakistan, India and Bangladesh
Abstract
While the importance of microfinance institutions (MFIs) for poverty alleviation and economic growth has always been acknowledged by the policymakers and researcher, the real challenge is how to make these banks self-sustainable. This study aims to shed light on the robust determinants of MFIs profitability in the South Asian countries including India, Bangladesh and Pakistan. Our empirical analysis relies upon the data set of 40 MFIs over the sample 2011 to 2020. For the econometric investigation, the study uses pooled OLS, random effects and fixed effects models. Our results confirm the relevance of cost management, bank size, and business mixed indicator, debt to equity ratio and management efficiencies of MFIs in determining their profitability. The results recommends that MFIs in Pakistan, India and Bangladesh should focus on the cost management, management efficiencies, Debt to Equity and Business Mix Indicator for the positive return for the MFIs
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