The performance of Islamic and conventional microfinance institutions in OIC countries: the effect of macroeconomics factors, institutions, digitalization and size
Microfinance institutions are recognized as an important niche within the market of financial services specifically for poor people. These institutions are classified as hybrid organizations with social and financial objectives, such as striving to produce social impact by reducing poverty and at th...
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| Format: | Thesis |
| Language: | English English |
| Published: |
2024
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| Online Access: | https://etd.uum.edu.my/12069/1/s903882_01.pdf https://etd.uum.edu.my/12069/2/s903882_02.pdf https://etd.uum.edu.my/12069/ |
| Abstract | Abstract here |
| Summary: | Microfinance institutions are recognized as an important niche within the market of financial services specifically for poor people. These institutions are classified as hybrid organizations with social and financial objectives, such as striving to produce social impact by reducing poverty and at the same time remains financially sustainable. Evidence shows that some microfinance institutions achieve both social and financial objectives, some achieve one objective, while some fail to achieve any objective altogether. This study examines the impact of macroeconomic, macro-institutional factors and digitalization on the financial and social performance of Islamic microfinance institutions (Islamic-MFI) and conventional microfinance institutions (conventional-MFI) in OIC countries. It investigates Islamic-MFI and conventional-MFI using fixed effect (FE) or random effect (RE) and compares both MFIs at big and small size level using least square dummy variable (LSDV) to capture their impacts at different size level. This study uses panel data of 186 microfinance institutions which comprises of 35 Islamic microfinance and the 151 conventional institutions for the period of 2008-2019 from 34 OIC countries. From the trend analysis, conventional-MFIs appears to be a leader in all social performance measured by average gross loan size and average number of active borrowers and financial performance measured by operational self-sufficiency and loan loss rate in OIC member countries. In comparison, results indicate that most of the macroeconomic, macro institutional factors, digitalization and size factors have similar significant relationship with social and financial performance of Islamic and conventional MFIs. However, some determinants are vice versa in respect to significance level and positive or negative signs of coefficients. Therefore, the results indicate macroeconomics and macroinstitutional. digitalization and size have complementary and rivalrous effects in Islamic and conventional microfinance institutions. The study gives another dimension to understanding microfinance performance in the aspects of evaluation, funding and replication of MFI in the Islamic world. |
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