Impact of Social Performance of Islamic Microfinance Institutions on their Operational and Financial Self-Sufficiency

Abstract

Microfinance organizations must prioritize both social and financial performance. Therefore, it is critical to determine how they affect one another. The purpose of this research is to examine the impact of social performance (SP) of global Islamic Microfinance Institutions (IMFIs) on their operational and financial self-sufficiency. Further, the study also checks the moderating role of institution size in this relationship. This research is based on unbalanced micro panel data. The Random Effect model is applied using Hausman test for the period 2015-2021 with 50 IMFIs sample. SP was measured through Number of Active Borrowers (NABO), Percentage of Female Borrowers (PFEB), and Gross Loan Portfolio (GLPF) as independent variables while Operational Self-sufficiency (OSS) and Financial Self-sufficiency (FSS) were the dependent variables. Other variables, Gross Domestic Product per Capita (GDPC), Consumer Price Index (CPIN) and Regulatory Quality (REQ) were used as control variables while Institution Size (IZ) was used as moderator. Results indicated that GLPF and PFEB have positive relationship with OSS while NABO has negative relationship with OSS. IZ has a negative relationship with OSS and it positively strengthens the relationship of PFEB and GLPF with OSS and negatively strengthens the relationship between NABO and OSS. GLPF has a positive relationship with FSS while NABO and PFEB have negative relationship with FSS. IZ has a positive relationship with FSS and it negatively strengthens the relationship between PFEB and GLPF and positively strengthens the relationship between NABO and OSS.