RE-EVALUATING SUSTAINABILITY OF MICROFINANCE INSTITUTIONS BY USING TOPSIS

Purpose: The measurement of sustainability for microfinance institutions (MFIs) has been a serious problem for both practitioners and researchers over the last few decades. A multicriteria decision-making approach is used to develop an index that measures the sustainability of microfinance institutions based on the double bottom line. Methodology: The sustainability score of MFIs operating in Pakistan for the year 2006-2015 is measured using the technique for order preference by similarity to ideal solution (TOPSIS). During the assessment, equal weights are assigned to all indicators of sustainability. Additionally, a hypothetical organization was assigned the industry threshold to generate composite scores using TOPSIS. Later, sustainability levels of individual MFIs were compared with this industry threshold. Findings: Microfinance institutions that attain higher financial sustainability and positive outreach are ranked high. The result shows that the threshold sustainability level of the microfinance sector in Pakistan from 2006-2015 was 23.52, 26.31, 23.80, 45.83, 45.83, 66.67, 77.77, 91.60, and 88.88 percent respectively. Although the sustainability level in 2015 decreases with respect to 2014, still the overall growth of the sector is remarkable. Practical implications: The results obtained from TOPSIS for evaluating the sustainability of MFIs under the double bottom line highlight its practical applicability. MFIs are under immense pressure by regulatory bodies, investors, donors, and financial experts to achieve sustainability. This index would help MFIs to track progress and improve their sustainability. Novelty/Originality: This study is the first of its kind to determine the sustainability of MFI by using all the four indicators of sustainability, including financial self-sufficiency, operational self-sufficiency, depth of outreach and breadth of outreach. Existing sustainability indicators does not provide the threshold level of sustainability. Instead, they provide a ranking of MFIs from top to bottom only. This study is novel to identify whether MFIs have met or failed to achieve sustainability by providing the threshold level

Shariah Governance Characteristics and Risk-Taking of Local and Foreign Islamic Banks in Malaysia: A Conceptual Model

Purpose: In Malaysia, since the global financial crisis in 2007 and 2008, the low level of stability, excessive risk-taking and weak governance structure in the dual banking system has become essential for deliberation. The purpose of this research is to develop a conceptual model on the effect of Shariah governance characteristics on risk-taking between local and foreign of Islamic banks in Malaysia. Design/Methodology/Approach: Based on prior review of indicators and findings, this research proposes a conceptual model of effective Shariah governance characteristics and its effect on risk-taking of Islamic banks. A self-develop of Shariah board index (SB-Index) based on SB size, education background, membership with IFSB and attendance in meeting. Insolvency risk, credit risk and liquidity risk are the proxy used for risk-taking measurement. The theory of stewardship and resource dependency theory are used as examples of the theories of corporate governance to support the conceptual framework suggested. Findings: The Islamic banks in Malaysia are assumed to have effective Shariah governance and there will be low impact on risk-taking. Implications/Originality/Value: The regulators of Islamic banks must prepare for the need to improve the current standards for corporate governance in Malaysia

Social and Islamic entrepreneurships for social justice: A structural framework for social enterprise economics

Entrepreneurship is indispensable for progress of human civilization and effectively exploring and exploiting existing and potential resources for wellbeing of humanity.Modern economics operates basically through two major modes of entrepreneurships : the market/private sector economics relying on commercial entrepreneurships (self-interest centric) and the state/public sector economics relying on state entrepreneurships (public-well-being centric). However, both individually and jointly, have failed to ensure economics fundamental goal of well-being for human societies.In response, social enterprise economics (third sector), which features cooperatives and not-for-profit social enterprises in the name of foundations, trusts/awqāf, social businesses, and similar undertakings, has emerged as a make-up strategy to meet the minimum unmet requirements for social well-being.However, there is a strongly felt belief that the social enterprise economics needs to be broadened and mainstreamed in order to include entirely charitable institutions, predominantly not-for-profit operations, and predominantly for-profit businesses but blended with social justice via provision of social welfare programs like corporate social responsibility, etc., for its emancipation as a major economic system to be able to play a leading role for ensuring desirable economic growth and development.Islamic entrepreneurship, which is basically a community-centric mode of business initiative, is closely related to social entrepreneurship. It is an antidote to the problem of intolerable economic and social dualism and a natural strategy against all forms of capitalist exploitation to control world resources, like, in the past, through European colonialism, and now, through American-led state terrorism. It is the natural guard against economic inequity, wealth concentration, and social divides.Based on its potential and using examples from Bangladesh and Malaysia, we contend that the Islamic style social entrepreneurship is intellectually and operationally superior and more efficient for effectively widening and mainstreaming community-centric social enterprise economics to ensure development with equity and social justice. The paper aims to put forward social enterprise economics (third sector) for dialogue and research in the context of effective functioning of modern economies ensuring community well-being

Historical Development of Corporate Social Responsibility- A Review on Early Studies

In this twenty first century, the term corporate social responsibility briefly known as CSR is becomes the business strategy. Multinational corporations are paying much more attention to publicize their commitment towards CSR. However, none of the early research explores the historical development of CSR in literature. This study highlighted the debate of CSR followed by the literature development. Keywords: Corporate Social Responsibility, History, Responsible Business, Strateg

The factors that affect the effectiveness of training: a study at Silterra Malaysia Sdn. Bhd., a semiconductor company in Malaysia

The purpose of this study is to identify the factors that can affect the effectiveness of the Yield Management training program at a semiconductor company.The research framework for this study was designed based on the Kirkpatrick model and questionnaires were distributed to the technical staff at Silterra.The study found that factors such as participants, trainer, training materials and organization could affect the effectiveness of the training while other factors such as the training program itself, working environment and technology were immaterial.The results also indicated that participants, trainer, training material and the organization had a positive relationship with the effectiveness of training at the different levels of the Kirkpatrick’s evaluation model

Profitability and accountability of South Asian microfinance institutions (MFIs)

This study aims are measure the profitability and compare the profitability and accountability of microfinance institutions (MFIs) in South Asia. This study adopted a quantitative research approach using secondary data of six MFIs from six countries of South Asia from 2008 to 2012.The data were collected from the Microfinance Information Exchange database. We employed financial ratio analysis, descriptive statistical analysis, and the econometric technique, considered the various performance indicators that have been standardized by the Consultative Group to Assist the Poor to measure the financial performance or the profitability of MFIs. Results showed that yield on gross loan portfolio and the number of active borrowers has significant positive effects, conversely, ages and operating expense ratio have significant negative effects on financial performance. Liquidity ratio has been shown as insignificant, but a positive relationship and cost per borrower was found to have no relationship with the profitability of MFIs. Thus, the study suggests reconsidering the interest rate charged by MFIs as this is one of the major barrier for client's loan repayment. MFIs should also maintain close relationship with borrower to keep them active, for instead, institutions can provide deposits or savings scheme for clients. However, some countries might have regulatory framework that unauthorized deposits service from borrowers

SUSTAINABILITY OF MICROFINANCE INSTITUTIONS IN THE PHILIPPINES

Background and Purpose: Microfinance is the most effective and widely acknowledged method of poverty alleviation across the globe but these days every so and often the MFIs are digressing from their primary mission in pretext of financial and operational sustainability of the organizations. The purpose of this research is to confirm the adherence of double bottom line sustainability of Microfinance institutions (MFIs) and further to identify the determinants of MFIs sustainability in the Philippines.   Methodology: The sample for the study was obtained from MIX- market for the period 1999-2018. Principal component analysis and KU model are used to measure the sustainability scores of MFIs. Later, a panel regression model is applied to identify the determinants of sustainability.   Findings: MFIs are not adhering to the double bottom line sustainability as majority of MFIs were unsustainable at different benchmarks set for the study. The sustainability can be achieved if MFIs start utilizing their assets, focus on improving their efficiency and portfolio quality. MFIs size also significantly influences the sustainability of MFIs.   Contributions: This study highlights the need for policy makers and regulators to develop a regulatory framework to reduce the operating cost and improve the portfolio quality of MFIs in the Philippines. They should also provide guidelines that would help MFIs in improving their asset utilization ratio as it would help them adhere to double bottom line sustainability.   Keywords: Sustainability, microfinance, double bottom line, outreach, financial sustainability.   Cite as: Bhuiyan, A. B., Saad, J., Md Kassim, A. A., Munir, A. N., & Ali, M. J. (2023). Sustainability of microfinance institutions in the Philippines.  Journal of Nusantara Studies, 8(TI), 43-61. http://dx.doi.org/10.24200/jonus.vol8issTIpp43-6

Innovation barriers and risks for food processing SMEs in Malaysia: A logistic regression analysis

Abstract The food industry is facing a period of rapid change driven by globalization, trade liberalization, development of genetic, processing and information technology, intellectual property rights, changes in family structure and health and food safety concerns. Given that the food processing SMEs account for a large part of mainstream businesses in Malaysia, this study sought to examine the impact of barriers and risks on the innovation of new product, process and services of food processing SMEs in Malaysia. To achieve this objectives, the study analysed primary data gathered from 247 executives of food processing SMEs in Malaysia with statistical and econometric techniques. The multiple logistic regression models were employed to estimate how innovations were being affected by the existing barriers. The study revealed that the Malaysian SMEs were suffering from financial sourcing problems and beset with the barriers of human capital, business competitiveness, infrastructure, and government policy. Further multiple logistic regression model's outputs showed significant impacts on innovations from financial barriers, especially in regard to financial assistance from the government or financial institutions, namely, high interest rates or profit charged, complicated loan application process and unable to enjoy promotional financial packages by financial institutions for food processing SMEs in Malaysia. The study recommended that the Malaysian SMEs' challenges be considered seriously and that the industry be provided with sufficient financial assistance in developing new products, new market and new sources of supply so that they can be truly sustainable and globally competitive

Social Accountability of Microfinance Institutions in South Asian Region

The purpose of the study is to examine the social accountability and argue comparison of outreach level of microfinance institutions in member countries of South Asian Association for Regional Cooperation (SAARC). The inquiry has employed quantitative research approach to meticulous secondary data that has quantify using financial ratio and multiple regression analysis. Our results expose that gross loan portfolio has significant positive relation with the number of clients served. Conversely, the average loan balance per borrower per GNI per capital and average outstanding balance have significant negative relation to the dependent variable. On the other hand, the yield on a gross loan portfolio, size of MFI and operational self-sufficiency has insignificant effect to the number of active borrowers. Eventually the study found no evidence of trade-off between profitability and outreach breadth. However, interest rate, board and ownership structure and outreach depth issue suggested for the further studies. Keywords: Microfinance, Accountability, Outreach, Mission Drift, South Asia JEL Classifications: G21, G32, O1

Social accountability of microfinance institutions in South Asian Region

The purpose of the study is to examine the social accountability and argue comparison of outreach level of microfinance institutions (MFIs) in member countries of South Asian Association for Regional Cooperation. The inquiry has employed quantitative research approach to meticulous secondary data that has quantify using financial ratio and multiple regression analysis. Our results expose that gross loan portfolio (GLP) has significant positive relation with the number of clients served. Conversely, the average loan balance per borrower per gross national income per capital and average outstanding balance have significant negative relation to the dependent variable.On the other hand, the yield on a GLP, size of MFIs and operational self-sufficiency has insignificant effect to the number of active borrowers. Eventually the study found no evidence of trade-off between profitability and outreach breadth.However, interest rate, board and ownership structure and outreach depth issue suggested for the further studies