Determinants of Outreach Performance of Microfinance Institutions in Pakistan

Abstract

Microfinance institutions (MFIs) are developed to provide financial services to poor people usually ignored by commercialized institutions. Their main purpose is to increase outreach both in terms of depth and breadth, by providing small loans and reaching maximum number of poor people. This study aims to study the factors that influence the outreach performance of MFIs in Pakistan. By using random effect regression, factors that influence the depth and breadth of outreach were determined. Return on asset and firm size effect both the depth and breadth of outreach, whereas, portfolio at risk greater than 30 days impact the breadth of outreach only. Additionally, operating expense ratio does not influence the outreach performance of MFI.

Keywords: outreach, performance, depth, breadth, microfinance, microfinance institutions