Mohammad Ashraful Mobin; Syed Othman Alhabshi; Abul Mansur Mohammed Masih (2015)
The commercialization process and over-emphasis on sustainability apparently improve micro finance Institutions financial performance and the scale in terms of total number of borrowers and average loan size. Whether focusing on financial sustainability is necessarily at the sacrifice of serving less poor clients? Social and finance performance of MFIs depend on the belief and culture of the participant of the society? The inconsistent results of previous studies implicate that linear regressions may be insufficient to explain the sustainability-outreach linkage because of potential non-linear relationship between financial sustainability and average loan size. To solve this puzzle this study employs advanced dynamic difference GMM as well as system GMM along with non linear Hansen threshold technique. The result shows the significant effect of religion on the social and financial performance microfinance institutions, while threshold effect found insignificant. Our findings present important insights for Islamic microfinance managers and donors as well as policy makers of the country to formulate a better policy. Social performance will harmonize the financial performance of microfinance institutions, so the MFIs authorities should not be worried about the financial sustainability while focusing on outreaching the poor.
