The purpose of this research is to investigate the effect of operational efficiency, gender of the borrowers and the population density on the performance of microfinancing institutions that play a significant role in alleviating poverty in developing countries.
A model showing the relationships among the variables is first proposed based on the hypotheses developed in the literature review. Then the model is tested with empirical data using multiple regression and path analysis. Data used in the analysis relate to 234 microfinancing institutions across 63 countries.
The study finds that operational efficiency and gender of the borrowers have a direct impact on the performance of microfinancing institutions. Although population density does not have a direct impact on performance it has an indirect effect through operational efficiency and gender of the borrowers.
The findings of this study reveal to the policy makers and managers of microfinancing institutions the importance of focussing on the three factors analysed (operational efficiency, gender of the borrowers and population density) to reduce poverty.
The study enhances the current knowledge in the literature relating to microfinancing. The findings help to improve the performance of microfinancing institutions resulting in efficient and effective utilisation of hundreds of millions of donor funds originating from tax payers in developed countries.
