Financial Performance of Microfinance Institutions: A Comparative Analysis between Pakistan and India
This study aims to identify the key factors influencing the financial performance of microfinance institutions in Pakistan and India. Secondary data for both countries has been extracted from 2010 to 2019 from the firms' annual reports and MIX Market. Generalized least squares regression has been employed to analyze the data. The results of multiple regression models suggest that in Pakistan, MFI performance is significantly influenced by age, size, and yield. In contrast, age, GDP, and yield significantly impact MFI performance in India. These results emphasize the need for both governments to enhance operational efficiency and effectiveness within their respective microfinance sectors, expanding financial services to rural and urban areas to increase the financial inclusion rate and reduce poverty. We have limited our study to 2019 to exclude the uncertainty caused by the COVID-19 pandemic. This prompts further research in this area, which can deepen the understanding of the microfinance industry's impact on socio-economic development. Our analysis not only provides significant insights to practitioners as to which factors are crucial to MFIs' performance in both countries. But also adds to the extant literature by providing a comparative analysis of the two economies. As the literature lacks a comparative analysis involving India and Pakistan, the present study aims to bridge that gap.