Transformations  in
Business & Economics

EFFICIENCY OF MICROFINANCE INSTITUTIONS AND ECONOMIC FREEDOM NEXUS: EMPIRICAL EVIDENCE FROM FOUR SELECTED ASIAN COUNTRIES⁴
Fakarudin Kamarudin, Nazratul Aina Mohamad Anwar, Fengsheng Chien, Hafezali Iqbal Hussain, Muhammad Sadiq

ABSTRACT. The impact of economic freedom's dimensions specifically on law's rule and government's size to the efficiency of the financial and social efficiency of the microfinance institutions (MFI) have been examined in this study. This study comprises of total 165 MFIs from four selected Asian countries over the period from 2011 to 2019. In overall, the MFIs are more capable to generating revenue from their financial activities to ensure their sustainability and to ensure they manage to provide better financial inclusions to the lower income society rather than merely focus on minimizing the poverty. The results from the panel regression analysis implied that property rights, government spending and tax burden are negatively significant with social efficiency of MFIs. On the other hand, government integrity showed a significant and positive relationship with social efficiency of MFIs. However, these variables revealed a consistent negative but insignificant relationship with the financial efficiency of MFIs.

KEYWORDS:  microfinance institutions, economic freedom, law's rule, government's size, financial efficiency, social efficiency.

JEL classification:  G18, G21, M14, M19.

⁴Acknowledgements: We would like to give thanks to the editors and the anonymous referees of the journal for constructive comments and suggestions, which have significantly helped to improve the contents of the paper. Furthermore, special thanks to Geran Penyelidikan Sekolah Perniagaan dan Ekonomi (GPSPE) 6303804-10601 sponsored by Sekolah Perniagaan dan Ekonomi, Universiti Putra Malaysia as an organization that funded our research. The usual caveats apply.