One of the socio-economic development indicator of a society is Microfinance Institutions (MFI) and banking sector. Especially the micro-finance which enables low earning individuals to get access to working capital to develop their livelihoods. All over the world micro-finance is considered to the complement of banking sector which mostly provides credit to the rural small businesses. Roy and Goswami (2013) in their review of 71 journals articles concludes that microfinance have a positive impact on the wide range of economic and social indicators including, better access to education for children, grater empowerment of women and increased participation of women in social and political activities. Ever since the emergence of the idea of microfinance it has helped millions come out of poverty (Waweru & Spraakman, 2012). MFI operations pursue two main objectives one is economic and other is social. The success of an MFI is measured based on the fulfilment of these objectives.
The system of credit and lending have existed for long; Romans, Greeks, Chinses and Indians all have been practicing the borrowing and lending using interest rates (Ismail & Salavat, 2006). The very recent concept of microfinance started in 1976 when a Bangladeshi man name Muhammad Younis gave a 27$ loan to 42 women to start small economic activity and give the money back later on. His idea starts to grow and eventually in the 80s and 90s in Bangladesh and other places microfinance activities became the center point of poverty alleviation.
The aim of this study is to evaluate different indicators that contributes in the measurement of performance of Microfinance Institution (MFI). The indicators are mainly divided into two categories economic and social. In this study the researcher aims to add two more indicators to assess the performance of MFI. Both primary (survey) and secondary (macroeconomic statistics) data is used to collect data. Multi-regression test is done using SPSS program, this will help understand the dependence each variable (Socio economic, financial access, macroeconomic, and Sound MFI) have on the dependent variable (MFI performance). The data proved that financial access, socio-economic development, and sound MFI are predictors of MFI performance.
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