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Environmental, Social, and Governance Practices and Microfinance Institutions Sustainability: A Global Study

Author

Listed:
  • Shamsuddin Ahamad
  • Sarwar Uddin Ahmed
  • Md. Aminul Islam
  • Mohd Faizal bin Yusof
  • Md Hakim Ali
  • Md Imtiaz Mostafiz
  • Mohd Hasanur Raihan Joarder

Abstract

This study investigates how environmental, social, and governance (ESG) practices influence the financial sustainability of microfinance institutions (MFIs) worldwide. Drawing inspiration from Adam Smith's perspectives on moral sentiments and institutional cohesion, the research examines whether strategic integration of ESG dimensions can enhance the operational efficiency of MFIs. Using a global panel dataset of 966 MFIs across 97 countries between 2010 and 2018, the study adopts a two‐stage approach. In the first stage, financial efficiency is assessed using data envelopment analysis. In the second, truncated regression models evaluate the effects of ESG dimensions on financial outcomes, with MFIs' size tested as a moderating factor. The results indicate that ESG performance significantly enhances financial efficiency. Environmental and governance factors have stronger effects among larger institutions, while the social dimension shows more complex patterns. These findings highlight the importance of tailored ESG integration and offer practical insights for improving institutional resilience through responsible finance.

Suggested Citation

  • Shamsuddin Ahamad & Sarwar Uddin Ahmed & Md. Aminul Islam & Mohd Faizal bin Yusof & Md Hakim Ali & Md Imtiaz Mostafiz & Mohd Hasanur Raihan Joarder, 2026. "Environmental, Social, and Governance Practices and Microfinance Institutions Sustainability: A Global Study," Sustainable Development, John Wiley & Sons, Ltd., vol. 34(1), pages 80-94, February.
    • Handle: RePEc:wly:sustdv:v:34:y:2026:i:1:p:80-94
    DOI: 10.1002/sd.70252
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    References listed on IDEAS

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