Impact of Macroeconomic Conditions on Financial Efficiency of Microfinance Institutions: Evidence from Pre and Post-Financial Crisis

Authors

  • Sarah Roslan UiTM
  • Nurazilah Zainal
  • Jamilah Mohd Mahyideen

Abstract

Since the financial crisis of 2007–2009, a very tough situation has been encountered across the financial sector. The crisis has shown that it has hampered economic development, including banking institutions. The effect of the crisis is not excluded from the operations of the MFIs, as it today constitutes an integral part of the financial system. This paper intends to analyse the pre-crisis and post-crisis financial efficiency levels of the MFIs as the first focus. Next, to examine the effect on the financial efficiency level in both crisis periods upon macroeconomic conditions. Data were collected from 166 MFIs of ASEAN 4 countries from 2000-2007 (pre-crisis) and 2010-2017 (post-crisis), comprising the Philippines, Vietnam, Cambodia, and Indonesia. The first phase of the analysis uses Data Envelopment Analysis to determine financial efficiency levels. The second phase employs Multivariate Panel Regression Analysis to examine the effect of macroeconomic conditions towards the level of financial efficiency obtained in the first phase. The first-phase review results indicate that the post-financial crisis efficiency score is barely higher than the pre-crisis efficiency score. This means that MFIs are financially efficient during crisis occurrences and afford to support the operation over a long-term basis. In the second phase, the regression analysis provides mixed findings, both significant and insignificant macroeconomic conditions affecting the financial efficiencies of MFIs. The insignificant results show the consequences of the crisis that some variables were unable to clarify the first-phase variance in the efficiency score of MFIs. Generally, the findings of this study will assist the microfinance industry by preparing it better equipped for any potential crisis. This is important because of the MFI's role in assisting the poor to ensure they are pulled out of a circle of poverty.

Downloads

Published

2021-08-04

How to Cite

Roslan, S., Zainal, N., & Mohd Mahyideen, J. (2021). Impact of Macroeconomic Conditions on Financial Efficiency of Microfinance Institutions: Evidence from Pre and Post-Financial Crisis. Journal of Technology Management and Technopreneurship (JTMT), 9(1), 32–47. Retrieved from https://jtmt.utem.edu.my/jtmt/article/view/6033

Issue

Vol. 9 No. 1 (2021)

Section

Journal of Technology Management and Technopreneurship

License

Copyright (c) 2021 The Journal of Technology Management and Technopreneurship (JTMT)

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-By 4.0 (CC BY 4.0)  that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).