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What determines the financial performance of microfinance institutions in Bangladesh? a panel data analysis

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Abstract

While there is considerable expansion of microfinance institutions (MFIs) in the developing countries, there is a paucity of literature that examines the determinants of their Financial Performance (FP) among the Least Developed Countries (LDCs). This article seeks to investigate the determinants of FP of MFIs in Bangladesh over the period 2007–2013. Using two different measures of financial performance (portfolio yield and profit margin), the results indicate that the depth and breadth of social outreach can improve FP of MFIs. In particular, targeting women borrowers, increasing the average loan per borrower and increasing the number of active borrowers can contribute significantly to enhance the FP of MFIs. The results also show that, increasing savings and reducing operating expense can also contribute to increase MFIs’s financial performance.

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Acknowledgements

The authors would like to thank the editor and two anonymous reviewers for their constructive comments and invaluable suggestions. The first author especially thanks Mr. Mesbah Uddin for his suggestions. The first author also would like to thank University of Malaya for funding her doctoral studies through Bright Spark Program.

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Authors and Affiliations

  1. Department of Development Studies, Faculty of Economics and Administration, University of Malaya, 50603, Kuala Lumpur, Malaysia

    Shamima Nasrin, Rajah Rasiah, Angathevar Baskaran & Muhammad Mehedi Masud

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  1. Shamima Nasrin
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  2. Rajah Rasiah
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  3. Angathevar Baskaran
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  4. Muhammad Mehedi Masud
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Correspondence to Angathevar Baskaran.

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Nasrin, S., Rasiah, R., Baskaran, A. et al. What determines the financial performance of microfinance institutions in Bangladesh? a panel data analysis. Qual Quant 52, 1409–1422 (2018). https://doi.org/10.1007/s11135-017-0528-1

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