Impact of Capital Structure on Performance of MFIs in Asia
Author: Rukhsana Bibi

The key objective of the study is to examine the impact of capital structure on financial and social performance of microfinance institutions of Asia for the period 2000 to 2013. For the panel data analysis Generalized Method of Moments is applied to deal with endogeneity and fixed effect better describes the models. The profitability and financial performance is measured by return on assets, return on equity, operational self-sufficiency, financial selfsufficiency and management efficiency, the social performance is measured by average loan size and number of borrowers. The main findings regarding capital structure shows that capital structure indicators have positive effect on management inefficiency while damaging effect on sustainability. The results also reveal that deposit to asset ratio has positive impact on outreach and return on asset while grants deteriorates sustainability and return on equity of MFIs. Moreover the findings clearly depict financial theories of capital structure. The results of the study clearly specify that size, NGOs and regulated MFIs influence the performance (financial and social) and productivity of the MFIs in Asia. Number of active borrower inversely effect the sustainability and social performance but have a positive effect on financial performance. Female borrower, cost per borrower, portfolio at risk is a negative contributor to performance, outreach and productivity whereas as loan loss rate acts different only for social performance. It reveals that macroeconomic indicator GDP growth has positive and significant impact on the sustainability and efficiency of MFIs. The implications that emerge from these results is that capital structure of MFIs play key determinant role in the performance of these institutions that remains the same even after including institution specific, country specific and region specific variables. Supervisor: Dr. Attiya Yasmin Javid

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Keywords : Capital Structure, Financial Self Sufficiency, MFIs, Number of Active Borrowers, Operational Self-Sufficiency, Outreach, Return on Asset, Return on Equity
Supervisor: Attiya Yasmin Javid

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