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Outreach, Sustainability and Efficiency of Microfinance Institutions in Nepal

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  • Subedi, Sabin
  • Karki, Dipesh

Abstract

Microfinance Institutions (MFIs) provide financial services to those who have no access to finance and are hence considered a tool for poverty alleviation. However, the clear relationship between the depth of the MFIs and their sustainability is still lacking as there is an ongoing debate on whether the two components complement each other or whether there exists a tradeoff. This study applied the panel regression analysis to the data from 44 MFIs of Nepal from 1999 to 2019 and explored the inter-relationship between depth and sustainability of MFI in the Nepalese context. In addition to the two variables of interest, this study further analyses the interaction effect of operational efficiency. The findings show a significant tradeoff relationship between outreach and sustainability at a 99% confidence interval, further moderated by operational efficiency. As a result of increased operational efficiency, MFIs can have better outreach and sustainability. These findings can thus provide a better policy prescription that promotes operational efficiency and ultimately improve both the outreach and sustainability of MFIs.

Suggested Citation

  • Subedi, Sabin & Karki, Dipesh, 2022. "Outreach, Sustainability and Efficiency of Microfinance Institutions in Nepal," Bhutan Journal of Business and Management, Gedu College of Business Studies, Royal University of Bhutan.
    • Handle: RePEc:eoq:bjbmjr:art32
    DOI: 10.17102/bjbm.v5.4
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    References listed on IDEAS

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    1. Shakil Quayes, 2012. "Depth of outreach and financial sustainability of microfinance institutions," Applied Economics, Taylor & Francis Journals, vol. 44(26), pages 3421-3433, September.
    2. Luminita Postelnicu & Niels Hermes, 2018. "Microfinance Performance and Social Capital: A Cross-Country Analysis," Journal of Business Ethics, Springer, vol. 153(2), pages 427-445, December.
    3. Shakil Quayes, 2015. "Outreach and performance of microfinance institutions: a panel analysis," Applied Economics, Taylor & Francis Journals, vol. 47(18), pages 1909-1925, April.
    4. Mark Schreiner, 2002. "Aspects of outreach: a framework for discussion of the social benefits of microfinance," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(5), pages 591-603.
    5. Tyler Wry & Eric Yanfei Zhao, 2018. "Taking Trade-offs Seriously: Examining the Contextually Contingent Relationship Between Social Outreach Intensity and Financial Sustainability in Global Microfinance," Organization Science, INFORMS, vol. 29(3), pages 507-528, June.
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