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Regulation, Supervision and Social and Financial Efficiency of Microfinance Institutions in ASEAN-5 Countries

Author

Listed:
  • Nurazilah Zainal

    (Faculty of Business and Management, Universiti Teknologi MARA Campus Seremban)

  • Fakarudin Kamarudin

    (School of Business and Economics, Universiti Putra Malaysia)

  • Siong Hook Law

    (School of Business and Economics, Universiti Putra Malaysia)

  • Mohammed Hariri Bakri

    (Faculty of Technology Management and Technopreneur, Universiti Teknikal Malaysia)

  • Fadzlan Sufian

    (Faculty of Business and Management, Universiti Teknologi MARA Campus Puncak Alam)

  • Annuar Md Nassir

    (School of Economics and Management, Xiamen University Malaysia)

Abstract

This study delivers new empirical evidence on the impact of banking regulations on the levels of social and financial efficiency of microfinance institutions (MFIs) between the years 2012 to 2018. The sample consisted of data from 172 MFIs from ASEAN-5 countries. As the first stage of the analysis, data envelopment analysis (DEA) was employed to determine a score of the level of social and financial efficiency for the sampled MFIs. Meanwhile, panel regression analysis and the Generalized Method of Moments (GMM) estimator were used to examine the impact of banking regulations on the level of social and financial efficiency of the sampled MFIs. The findings showed that the sampled MFIs achieved a lower level of social efficiency while attaining a higher level of financial efficiency. The lower level of social efficiency indicated that the sampled MFIs had lost their focus on poverty reduction, while at the same time, switching their focus toward financial sustainability. The empirical findings also showed a significant impact of bank regulation and bank supervision on the levels of social and financial efficiency. Overall, bank regulation negatively influenced the level of social efficiency and bank supervision impacted the level of financial efficiency of the sampled MFIs positively. The findings from this study provide new insights for bank regulators and policymakers to construct regulatory frameworks that are relevant to the operation of MFIs.

Suggested Citation

  • Nurazilah Zainal & Fakarudin Kamarudin & Siong Hook Law & Mohammed Hariri Bakri & Fadzlan Sufian & Annuar Md Nassir, 2020. "Regulation, Supervision and Social and Financial Efficiency of Microfinance Institutions in ASEAN-5 Countries," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 57(2), pages 253-273, December.
    • Handle: RePEc:mjr:journl:v:57:y:2020:i:2:p:253-273
    DOI: 10.22452/MJES.vol57no2.5
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    More about this item

    Keywords

    Financial efficiency; microfinance institutions; regulation; social efficiency; supervision;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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