Social goal of microfinance institutions in South East Asia countries: evidence for poverty reduction
Banking institutions have witnessed the failure of poverty reduction as a result of their provision of high-risk services to the poor. Microfinance institutions (MFIs) were created to offer low-income households with financial services. In the effort to provide continuous financial services to the poor, MFI performance is one of the most important factors to evaluate. The MFIs originated with the objective of reducing poverty as a social goal. However, the commercialization of MFIs has resulted in their financial independence, as they were formerly supported by a government. Currently, MFIs must continue to play a social role in eradicating poverty, while also striving for long-term viability. This study aims to estimate the social efficiency of MFIs in the five ASEAN countries. Data from 168 MFIs in South East Asia covering five countries from 2011 to 2017 makes up the sample. The level of social efficiency is determined using a nonparametric Data Envelopment Analysis (DEA) method. According to the study, the MFIs in the ASEAN-5 countries are less socially efficient. This suggests that the MFIs in the ASEAN-5 countries have sacrificed their initial objective of reducing poverty for a focus on establishing financial sustainability for long-term viability.
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