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Determinants of Performance of Microfinance Institutions: Cross Country Analysis

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  • Fahana Ferdousi

Abstract

This study investigates the effect of both financial sector development and the macroeconomic development on the performance of microfinance institutions (MFIs). The study uses random effect model as an analytical framework and the findings indicate that MFI’s outreach are increased where formal financial system is less developed but to be profitable or to maintain a certain level of standard, minimum financial development is expected. Similar with financial sector development, MFIs also flourish where macro economy is less developed. But such situations are weakly associated with profitability. This study suggests that better macro economy and improved financial system could utilize resources more efficiently and thus leads to more returns on assets with a view to enhance MFIs performance.

Suggested Citation

  • Fahana Ferdousi, 2013. "Determinants of Performance of Microfinance Institutions: Cross Country Analysis," International Journal of Financial Economics, Research Academy of Social Sciences, vol. 1(4), pages 143-151.
    • Handle: RePEc:rss:jnljfe:v1i4p5
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    References listed on IDEAS

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