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    Theary Theary Document Transcript

    • IntroductionIn this report analysis on governance and performance of microfinanceInstitutions(MFI) in India. MFIs supply banking services to micro-enterprises and poor families. The MFI has governance problems thatare similar to ordinary banks, but also peculiar problems of its own. Forinstance, most MFIs have a dual mission of reaching poor clients andbeing financial sustainable, few MFIs are regulated, and several MFIsstill depend on donor funding. Good corporate governance has beenidentified as a key bottleneck to strengthen the financial performance ofMFIs and increase outreach of microfinance. This report aims to fill thevoid by analyzing governance mechanisms on a wide range ofperformance and risk measures using a unique data set spanning 60companies.Beside the owner-manager agency relationship in ordinary firms, thefirm customer relationship is important in banks. This makes itimportant to use a broad set of relevant corporate governance variablesfor explanation of the MFIs performance and risk. We look at suchtraditional aspects as board characteristics and ownership but also bringin the role that innovations in the MFI loan methodology play inovercoming its repayment problems, perhaps the best known is grouplending. The microfinance organization’s ownership type may play arole. In microfinance, both ordinary shareholder owned firms and non-profit organizations exist. Furthermore, due to their role in the countrysfinancial infrastructure, and the individual MFIs access to funds, theregulation of the MFI is important. In all, we analyze the effect ongovernance and the MFIs performance.Stakeholders, such as customers, employees and donors sit on the MFIboard. In this report a very small incidence of stakeholder boardrepresentations, making regression and hypothesis analyses based onsecondary data. Find that there are systematic differences between thegovernance of banking and manufacturing firms. This indicates that
    • governance structures are industry specific. Hence, to improve theperformance of MFIs there is a need to better understand the influenceof different corporate governance mechanisms in this specific industry.This further motivates the need for this report as it claims to be the firstglobal study on the influence of corporate governance on MFI firmperformance and risk.The UN Year of Microcredit in 2005 and the Nobel Peace Prize toMohammed Yunus and Grameen Bank in 2006 have given considerablepublic recognition to microfinance as a development tool. Christen et al.(2004) report an astonishing 500 million persons served, mostly withsavings accounts, while the Microcredit Summit in the 2006-meeting inHalifax celebrated the milestone of 100 million borrowers reached.Nevertheless, microfinance still reaches only a fraction of the worldspoor (Robinson, 2001; Christen et al., 2004). Hence, there is a supplychallenge in the industry (Helms, 2006; C-GAP, 2004, 2006). Our datais a self constructed dataset with unusually high-quality information,collected by third party rating agencies, for up to four financial yearsfrom 148 MFIs in India.The institutions are united in their willingness to open up their accountsto careful scrutiny carried out by specialized rating agencies and toaccept that the reports become publicly available. The institutions thusrepresent the best hopes for reaching the dual goal of reaching poorclients and being financial sustainable. Since we want to exploreperformance and risk effects from characteristics that are fixed over thesample period, such as ownership type, we perform econometricanalyses with the random effects panel data method.Considerable research efforts have been dedicated to microfinance.Especially the possible impact from getting access to microfinance theeconomics of group lending the building of inclusive financial sectorsas well as the development of theory has motivated researchers. Linkedto the schism debate is the study of the performance of microfinanceorganizations. Here the Mixmarket and the Microbanking Bulletin
    • (www.mixmarket.org) have provided the industry with importantknowledge and benchmarks. Nevertheless, empirical progress on betterunderstanding of the corporate governance mechanisms influencingperformance is still held back by the lack of reliable cross-country data.Thus, by introducing a unique dataset to link MFI and performance atthe individual MFI level our paper complements the existing research inthe microfinance field.1.2. Governance and performance in MFIGovernance is about achieving corporate goals. For the MFI, multiplegoals exist. The fundamental goal is to contribute to development. Thisinvolves reaching more clients and poorer population strata, the so calledmain outreach frontier of microfinance (Helms, 2006; Johnson et al.,2006). A second goal is to do this in a way that achieves financialsustainability, preferably independence from donors. While Rhyne(1998) considers these two main goal areas to be a win-win situation,claiming that those MFI institutions that follow the principles of goodbanking will also be those that alleviate the most poverty, Woller et al.(1999); Morduch (2000) think that the proposition is far morecomplicated. In this paper, we are able to throw light on the controversyby using both financial and outreach measures. In addition, we also lookat the governance impact upon risk.In this paper, we differentiate between financial performance andoutreach. However, in the microfinance literature the lines are not asclear cut. For instance, Hartarska (2005) uses dependent variables basedon outreach and sustainability. Outreach is measured in breadth anddepth. Breadth of outreach is the logarithm of active borrowers, depth isthe average loan size on GDP per capita. Sustainability is ROA andoperational self-sufficiency. We maintain the division between financialperformance and outreach. The financial performance variables includeROA, but also variables that go behind ROA, including operational
    • costs and operational self- sufficiency. These are major underlyingvariables influencing ROA. In addition we also include debt/equity ratio(DE) since good corporate governance should show an impact upon thisvariable.
    • Table 1 gives an overview of dependent variable definitions.Before discussing specific mechanisms for achieving goals, we need toconsider the special nature of banks. As a provider of banking services,the MFI is subject to adverse selection and moral hazard from creditclients with little or no collateral. Adverse selection arises since the MFIdoes not have enough information to differentiate between good and badrisks. Moral hazard is the problem that the borrower will not exertnecessary efforts to repay the loan, when the bank is unable to monitorthe effort. What sets the new microfinance initiatives apart is that offinding new ways to deal with these problems, and thereby, to establishworkable business models.I have differentiated between financial performance and outreach in thecomments to board characteristics. This seems unnecessary, as a boardthat is performing well on the financial side must be expected to do wellon its business side, or outreach, too. Likewise, a better board shouldshow up in lower values in operational cost regression as well as highervalues on debt/equity since better boards should be able to attract moredebt. For risk levels the analysis is not straightforward. Lower riskshould reduce losses and improve ROA. However, there can sometimesbe a trade-off between slight increases in risk levels and loweroperational costs. A good board should strike the balance between risklevels and operational costs to maximise its ROA. Microfinance hasproduced innovations in lending that may overcome the adverseselection and moral hazard problems mentioned above. This happensbecause group lending leads to assortative grouping, that is, that the bestcredit risk groups band together naturally, out of local knowledge oftrustworthiness. Borrowers have a joint liability for the individual loans.This creates social capital collateral, which the individual borrower willseek to protect. Thus, the fear of losing this collateral leads to betterrepayment rates.
    • Microfinance is the provision of financial and non-financial services tothe poor who are excluded from financial /credit markets because theyare considered unbankable. Indeed, microfinance institutions haveevolved primarily as a consequence of the efforts individuals andassistance agencies have committed to the idea of ensuring that the poorpeople have access to some form of credit. The majority of MFIs claimhaving a dual mission of reaching poor borrowers (outreach), andprofitability, being financially sustainable (sustainability).While the social goals of reaching the poorest and poverty alleviation arevalid, financial sustainability has emerged as one of the coremanagement and governance issues. The shrinking resources base fordonor funds to support the increasing demand for grants and soft loansimplies that MFIs will eventually have to support themselves. However,their sustainability will focus on governance structures within theindustry. Indeed, in the last decade corporate governance principles haveimposed themselves as the basic rules for any well-run company tofollow. The trend has however transcended from traditional businesscompanies but now is part of the globalization process often seen as atool for standardizing the controlling vision for any major organizationin the world. The drive towards Governance has been propelled by anumber of factors, particularly the collapses of some of the majorplayers in the Industry, the influx of private Equity and fall in donorfunding.Governance is about achieving corporate goals. The fundamentalpurpose of MFIs is to contribute to a country development. Thisinvolves reaching out to more clients, especially the poor. Not least butnow growing in importance, especially among donors, is the requirementthat MFIs achieve financial sustainability.Microfinance practitioners assert that good governance is the key to asuccessful MFI. In spite of these observations, only few studies have
    • focused on governance and the examination of the linkage of variousgovernance mechanisms and performance (McGuire 1999). It seemsrelevant to examine closely the role of various governance mechanismssince MFIs managers control significant resources. No more studiesattempt to shed light on the link between governance and performance,especially in the Indian countries, although it is a very active zone with amicrofinance industry quite diverse (NGO (2), NBFI (3), Bank) whereactors should simultaneously pursue the most effective way of realizingtheir social objective while achieving superior levels of profitability.While exploiting a recently conducted survey by the author in order tostudy the efficiency of MFIs in India, the annual financial reports of themicrofinance institutions, and other relevant information collected fromMicrofinance Information Exchange (MIX), this report aims toinvestigate the link between governance and MFIs performance in termsof outreach and sustainability since governance guides an institution infulfilling its corporate mission and protects the institutions assets overtime. The empirical model explores the joint and individual effect ofmanagement compensation, board diversity, and external governancemechanisms on both MFI sustainability and the depth and breath ofoutreach while controlling for individual characteristics and, as well ascountrys specific factors. The results show that performance-basedcompensation does not improve performance. MFIs with larger boardsseem to do better. More independent boards are more effective,however. Board diversity (Higher proportion of women) seems toameliorate the outreach. External governance mechanisms especiallyauditing and regulation improve the financial sustainability.This report analyzes the relationship between firm performance andcorporate governance in Microfinance Institutions (MFIs). It studies theeffects of ownership type, competition and regulation using a global dataset on MFIs, collected from third-party rating agencies.
    • LITERATURE REVIEWGovernance in microfinance has been recognized to be an importantissue. However, the biggest problem to microfinance practitioners hasbeen balancing the dual mission of outreach and sustainability. Thechanging of microfinance environment has shown a move towardssustainability ultimately leading to governance issues as donor fundsshrink and equity inflows increase in the microfinance sector.Microfinance institutions have therefore embraced boards and adoptedprinciples of corporate governance to ensure their survival.Investigating the link between good governance and the performance ofMFIs in terms of outreach and sustainability is crucial since governanceguides an institution in fulfilling its corporate mission and protects theinstitution assets over the time. However, there is a limited amount ofacademic studies dealing with this subject, partly due to the lack of data.While using three surveys of rated and unrated East European MFIsfrom three random samples in the period 1998 to 2002, Hartarska(2005), investigates the relation between governance mechanisms andfinancial performance. Financial performance and outreach constitutedependant variable dimensions and governance mechanisms includeboard characteristics, managerial compensation, and externalgovernance mechanisms such as rating, financial statements audited, andsupervision. The author finds that performance-based compensation ofmanagers is not associated with better performing MFIs; lower wagessuggested for mission-driven organization worsen outreach. She alsoidentifies that a more independent board has the better ROA, but theboard of employee directors gives lower financial performance andlower outreach. Finally, the author concludes that external governancemechanism seems to have a limited role in the study region.In a recent study, Mersland and Strom (2007), use a self-constructedglobal data set on MFIs spanning 57 countries collected from third-partyrating agencies. The authors study the effect of board characteristics,
    • ownership type, competition and regulations on the MFIs outreach topoor clients and its financial performance. They found that split roles ofCEO Chairman, a female CEO, and competition are an importantexplanation. Moreover, the authors found that the larger board sizedecreased the average loan size, while individual guaranteed loanincreased it. Finally, they conclude that there is no difference betweennon-profit organizations and shareholder firms in financial performanceand outreach.The third study was conducted by Cull et al. (2007) looking at MFIsfinancial performance and outreach as well, with a focus on lendingmethodology (5), controlling for capital and labour cost as well asinstitutional features. While using the data from 124 rated MFIs, theauthors found that MFIs which focus on providing loans to individualsperform better in terms of profitability. Yet, the fraction of poorborrowers and female borrowers in the loan portfolio of these MFIs islower than for MFIs which focus on lending to groups. The studysuggests also that individual-based MFIs, especially if they grow larger,focus increasingly on wealthier clients, a phenomenon termed as"mission drift". This mission drift does not occur as strongly for thegroup-based MFIs. However, no governance variables, such as boardcharacteristics or ownership type are taken into consideration.The limited academic investigation into the link between governancemechanisms and performance of MFIs in terms of outreach andsustainability, and the fact that other governance mechanisms such as theproportion of women in the board remain unexplored justify theimportance of a similar study in the Euro-Mediterranean zone,characterized by a very active and quite diverse microfinance industry,that complete former studies.
    • 4.Conceptual framework and working hypothesisWhile focusing on the microfinance field, the governance can be definedas the process of guiding an institution to achieve its objectives whileprotecting its assets. It refers to the mechanisms through which donors,equity, investors, and other providers of funds ensure themselves thattheir funds will be used according to the intended purposes. Thepresence of these control mechanisms is crucial either to align theinterests of managers and providers of funds since they may havediverting preferences and objectives, or to monitor the performance ofmanagers to ensure that they use their delegated power to generate thehighest possible returns for the providers of funds. This notion comesfrom the agency perspective. The explanatory model of the structures offinancing and shareholding is founded on the assumption ofasymmetry of information and conflicts of interests between managersand providers of funds, agency relationship is a contract under which"one or more persons (principal) engage another person (agent) toperform some service on their behalf, which involves delegating somedecision-making authority to the agent". In this case the relation ofagency will relate the principal (owner) and his agent (manager), thislast being engaged to serve the interests of the first. From these relationsthe concept of agency costs emanates, costs which result from thepotentially opportunist character of the actors (moral hazard) andinformation asymmetry between the contracting parties (adverseselection). These agency costs represent the loss in value compared to anideal situation where there is no information asymmetry and conflict ofinterests. According to the theorist of agency, an organization isconsidered efficient if it minimizes the agency costs. This purpose canbe intended through an effective governance mechanism.
    • 4.1. External governance mechanismsThe external governance mechanism can be implemented as a result ofthe failure or the weakness of internal governance mechanisms. In themicrofinance industry donors and creditors are increasingly relying oninformation from audited financial statement and rating agencies. Theseexternal governance mechanisms are an important mechanism thatprovides depositors, creditors and shareholders with credible assurancesthat they will refrain from fraudulent activities. In other words, itreduces informational asymmetries between the differentstakeholders and the firm.Audited financial statements are an important tool for the assessment ofMFIs by regulators and capital markets. They form an important part ofthe effective corporate governance. The auditors role is to provide adisinterested and objective view whether the financial statements on theMFI are in line with generally accepted accounting standards. It is ameans to ensure potential investors and donors that MFI complies withthe accounting practices and managers do not misrepresent financialinformation. In the absence of developed equity and debt market, donors andinvestors rely on independent evaluation of MFIs performance. A MFIsrating reflects a rating agencys opinion of entitys overallcreditworthiness and its capacity to satisfy its financial obligations. Theraters evaluate objectively and independently the corporate governancein MFI and rank it on a relative rating scale that would facilitatecomparison. Unlike typical rating agencies that rate the riskiness ofissued debt, microfinance rating agencies rate the overall performance ofthe MFI in terms of outreach and sustainability.
    • 5. Data and methodological issuesData for this study are obtained from MIX (Microfinance InformationExchange). The performance variables and some governance variablesare also obtained from the annual financial reports of the microfinanceinstitutions collected from Microfinance Information Exchange (MIX), anongovernmental organization whose object is to promote the exchangeof information on the microfinance sector in India. All data aresecondary collected from the MIX and based on these data. There aremainly two variable; dependent and independent. Dependent variablesare OSS (Operational self-sufficiency), OER (Operating cost) and ROA(Return on asset).Where independent variable are SIZE, LOAN,DEPOSITE RATIO, CAPITAL, NO.OF ACTIVE BORROWER,AVG.LOAN BAL.BORROWER, WOMEN BORROWER etc..There are 60 MFIs out of 148 includes NGOs, NBFIs and BANKs. Thisis analyzed through hypothesis and regression models.The descriptive statistics for this study are shown in Table 3. Theperformances of Microfinance Institutions are widely spread. Onaverage, the MFIs recorded a return on assets of 5,935%. While theminimum was-7.58%, the maximum performance was 33% indicating awidely spread performance. Similarly, the studied MFIs have on averagean Operational Self-Sufficiency of 85.41% with respectively a minimumand a maximum of 20.345% and 143.33%. With regard to the DEPTH,the average values of relatively weak 220 indicate that the poorborrowers are very well served.On average, the MFIs managers have 8.4 years of experience and 82.4%of these managers are receiving a Fixed-wage. On average, 5 personsserve on the board of an MFI and a standard deviation of 3,32 coupledwith a maximum board size of 16 members and a minimum board sizeof 4 members suggest that these boards are widely dispersed. Theunaffiliated directors represent on average 45% of the board members.The descriptive statistics also indicate that on average 39% of all boards
    • are made up of women.In our sample, around half of the MFIs have an internal auditor reportingdirectly to the board. Moreover, 81% of the MFIs studied have theirfinancial statement audited and 37% of the MFIs forming the sample arerated. The result also shows that 42% of the institutions are regulated,and the individual lending technology constitutes 73% of the cases. Theaverage age standing for the MFI is about 3 years. The NGOs represent59% of our sample, however, the NBFI and Bank represent respectively17% and 9% of the sample. Finally, the average inflation rate in all thecountries subject to the study is about 16%.
    • FINDINGSAs shown in Table 4 dealing with the estimation of the impact onsustainability and outreach, our first hypothesis stipulating that theremuneration system (performance-based compensation or fixedsalary) is confirmed. The coefficient of Fixed-wage is notsignificant in any of the specification.Managerial qualifications as shown by the positive and significantsign of Experience in the OSS, ROA and OER regressions as wellas the enviable negative and significant coefficient in the depthindicate that the acquired experience allows MFIs managers toreach poor borrowers and produce better sustainability.Board size is rather positively related to ROA, OSS, and OERsuggesting to the contrary that MFIs with larger boards seem to dobetter. The results reduplicate our second hypothesis and confirmstudies that support the view that larger boards are better forcorporate performance since members have a range of expertise tohelp to make better decision, and are harder for powerful CEO todominate. An important result of this study is the support MFIswith a higher proportion of unaffiliated directors had bettersustainability (ROA & OSS) and also reach poor borrowers.The results of the study show that board diversity (higherdproportion of women) improves social performance. This isconsistent with recent thinking and discussions which point to thefact that governance reforms have been geared towards theimportance of gender diversity, especially in the boardroom, andthat the issue of gender diversity is central and could enhanceboard effectiveness by tapping broader talent pools for theirdirectors resulting in the more diverse board having better relationswith other stakeholders such as customers, suppliers, and
    • employees which inevitably translate into performance and firmvalue.Although microfinance rating agencies rate the overallperformance of the MFIs in terms of outreach and sustainability,the empirical results show that this variable does not have anysignificant influence on MFIs performance. In addition, the studyreveals that MFIs having their financial statement audited achievebetter sustainability. These MFIs comply with accounting practicesand are able to reach higher levels of financial performance.Regulated MFIs do not reach more borrowers but according to theresults in Table 4, have significant and positive ROA & OSS.Although this result is diverse from past studies which did not findany relation between these two dimensions, or found a weakrelation, it brings the evidence that regulation may assurecustomers that they are treated fairly and this could lead to morebusiness and better financial performance.Results indicate that the lending technology improves considerablythe financial performance of the MFIs. This result can be attributedto the fact that the cost argument is more important than therepayment argument for group lending or village bank. Thesupposed efficiency in group lending does not hold in India. Fromanother point of view, it can be justified by the new tendencytoward the individual micro lending, since this methodologybecomes highly recommended.
    • In conformity with the theory, the age of the firm as proxy for reputationimpacts positively on performance likewise the size of the MFI.Expectedly, the size of MFI has a significant positive impact onperformance. This may be due to the fact that a large firm has the abilityto accommodate risk and to enhance productivity through diversificationof products and services. The study shows that NGOs are more efficientthan NBFI and show better social performance by reaching the poor. Itbecomes clear that NGOs are more consistent with their social missionthan with their financial performance. The results reveal also thesignificance of controlling for cross country differences. The level ofinflation affects negatively the sustainability of MFIs. Finally, the studysuggests that the economy of big size affects outreach.
    • Conclusion and RecommendationThis report tests empirically the relationship between governance MFIsperformance in terms of outreach and sustainability. While usingsecondary data from MIX as well as from the annual financial reportsand from the Mix Market, the study examines the impact of managementremuneration, board independence and diversity, internal auditorreporting directly to the board, external governance mechanisms ofcontrol, and MFIs in India. Results indicate that not all knowngovernance mechanisms affect performance and in addition, differentfactors have the differential effect on outreach and sustainability.The study shows that explicit and implicit incentives schemes such ascompensation, perks, etc. become less powerful and less able to motivatemanagers. Results also show that larger boards are better for MFIsperformance since members have a range of expertise to help to makebetter decision and are harder for powerful CEO to dominate. Moreover,the study reveals that microfinance boards with larger proportions ofunaffiliated directors achieve better results. Thus, independence of themicrofinance board should be encouraged.The fundamental result of this study is that board diversity (higherproportion of women) enhances performance and again the more womenthere are on the board, the better the performance. Thus board diversityis paramount for enhanced performance of microfinance institution.Having financial statement audited, and being rated by internationalagencies is synonym to a better financial performance. It seems thatexternal governance mechanisms help MFIs to reach their financialperformance. This study allows us to distinguish other factors leadingalso to a better sustainability such as Regulation and the use ofindividual lending methodology. However, the MFIs type (NGO) seems
    • to be more consistent with their social mission than with their financialperformance. The microfinance institutions characteristics such as ageand size affect positively the performance; nevertheless, the level ofinflation has a negative impact on the sustainability of MFIs.Although this study brings some clarifications on the link between thegovernance mechanisms and performance of microfinance in India,several governance mechanisms remain unexplored such as CEOduality, graduate board members, international directors, ownershipstructure. Thus, it seems relevant to conduct more studies in order tolearn more about the impact of these governance mechanisms onoutreach and sustainability of MFIs not only in the India.
    • Bibiliography MFIs in india | Microfinance india Governance and performance of microfinance institutions in Mediterranean countries. - Free Online Library Books, journals, articles. Research papers, reports of researchers etc…….. Indian Association for Savings and Credit | MFIs in India BSS Microfinance Pvt. Ltd. | MFIs in India ADARSHA | MFIs in India Anisha Microfin Association | MFIs in India Camel Mahila Macts Limited | MFIs in India
    • References:(1) Microfinance Institutions(2) Non-Governmental Organisation(3) Non-Financial Bank Institution(4) This figure quotes the most famous MFIs in the Mediterraneanregion.(5) Lending methodology refers to the way loans are given. Individualloans, group loans, and village banks (which are bigger groups that oftenhave wider objectives than to serve as a guarantee mechanism only) arethe categories used.(6) Jensen, M. C.; Meckling, W. H. 1976. Theory of the firm:managerial behaviour, agency costs, and ownership structure, Journal ofFinancial Economics 3: 305-350.(7) Informations on the MIX are available on the Web sitewww.themix.org. The data bases on the MFIs are accessible by the mix-market, an online data base accessible from the MIX site. Mix Market,known formerly under the name of "Virtual Market of Microfinance"was initiated jointly by the UNCTAD and the Government ofLuxembourg. In 2001, it was taken in charge by the Consultative Groupto Assist the Poor (CGAP), a consortium of backers which works for thedevelopment of Microfinance in the world.(8) Although the properties of the Hausman test for endogeneity are notwell understood in small samples, this test does not indicate that theindividual governance mechanisms are endogenous (Wooldridge 2002).
    • (9) The higher the value of DEPTH, the less poor clients are beingserved. Therefore from a poverty-alleviation perspective, a smaller valueof this variable is preferred.Table 1. Definitions of dependent variables used in analysesVariable ExplanationSocial Performance:OutreachNAB Logarithm of the number of active borrowersDEPTH The average loan size on GDP per capitaFinancial Performance:SustainabilityROA Return On AssetsOSS Operational Self-SufficiencyTable 2. Definitions of independent variables used in analysesVariable ExplanationLoan A loan outstanding per total assets.Women The proportion of the women on the boardAudited A dummy that equals one if the financial statement reports directly to the board
    • Rated A dummy that equals one if the MFI is four rated andfive rated is equals zero zeroRegulation A dummy being one if the MFI is regulated by banking authoritiesMFI age Number of years since the commencementMFI size Logarithm of the total assets of the MFINGO The MFI is an NGO and dummy that equals oneNBFI The MFI is an non-financial bank institution anddummy that equals oneBank The MFI is an bank and dummy that equals threeEconomy size Logarithm of total GDP (Gross Domestic Product of the country) for the year tBorrower/staff The active borrower divided by staff membersDeposite ratio Total deposite divided by total assetCapital Tptal equity divided by total asset (1) ROA: b ANOVAModel Sum of Squares df Mean Square F Sig. a1 Regression .205 6 .034 2.292 .036 Residual 3.445 231 .015 Total 3.650 237a. Predictors: (Constant), NO.OFACTIVEBORROWER, SIZE, LOAN, PORTFOLIOAT30DAYS,CAPITAL, DEPOSITERATIOb. Dependent Variable: ROASuggestion= here f significant level is less than 5%, so H0 is accepted.
    • a Coefficients Standardized Unstandardized Coefficients Coefficients 95.0% Confidence Interval for BModel B Std. Error Beta t Sig. Lower Bound Upper Bound1 (Constant) .005 .032 .142 .888 -.058 .067 CAPITAL -.100 .038 -.176 -2.642 .009 -.174 -.025 PORTFOLIOAT3 -.004 .056 -.005 -.070 .945 -.114 .106 0DAYS LOAN -.007 .008 -.057 -.882 .379 -.024 .009 SIZE .032 .032 .068 1.015 .311 -.031 .095 DEPOSITERATIO -.005 .065 -.005 -.072 .942 -.133 .123 NO.OFACTIVEB .001 .001 .122 1.886 .060 .000 .002 ORROWERa. Dependent Variable: ROA Y=a+bx Y=.005-0.1x1-0.004x2-0.007x3+0.032x4-.005x5+0.001x6 X1=capital X2=portfolio X3=days X4=loan X4=size X5=deposit X6=no. of nab (2) OER: b ANOVA Model Sum of Squares df Mean Square F Sig. a 1 Regression .839 6 .140 2.965 .008 Residual 10.937 232 .047 Total 11.776 238
    • a. Predictors: (Constant), NO.OFACTIVEBORROWER, SIZE, PORTFOLIOAT30DAYS, LOAN, CAPITAL, DEPOSITERATIO b. Dependent Variable: OER Suggestion= here f significant level is more than 5%, so H1 (alternate hypothesis) is rejected. a Coefficients Standardized Unstandardized Coefficients Coefficients 95.0% Confidence Interval for BModel B Std. Error Beta t Sig. Lower Bound Upper Bound1 (Constant) .145 .058 2.515 .013 .031 .258 CAPITAL .236 .067 .231 3.503 .001 .103 .368 PORTFOLIOAT30DAYS -.082 .099 -.053 -.828 .409 -.277 .113 LOAN -.022 .015 -.094 -1.461 .145 -.051 .008 SIZE -.009 .058 -.011 -.161 .873 -.123 .105 DEPOSITERATIO -.021 .115 -.012 -.185 .854 -.249 .206 NO.OFACTIVEBORROWER .000 .001 -.015 -.231 .818 -.002 .002a. Dependent Variable: OER Y=a+bX Y=0.145+0.236X1-0.082X2-0.022X3-0.009X4-0.021X5+0.00X6 (3) OSS: b ANOVA Model Sum of Squares df Mean Square F Sig. a 1 Regression .678 6 .113 .964 .451 Residual 27.201 232 .117 Total 27.879 238
    • a. Predictors: (Constant), NO.OFACTIVEBORROWER, SIZE, PORTFOLIOAT30DAYS, LOAN, CAPITAL, DEPOSITERATIO b. Dependent Variable: OSS Suggestion= here f significant level is less than 5%, so H0 is accepted. a Coefficients Standardized Unstandardized Coefficients Coefficients 95.0% Confidence Interval for BModel B Std. Error Beta t Sig. Lower Bound Upper Bound1 (Constant) 1.264 .091 13.918 .000 1.085 1.443 CAPITAL -.118 .106 -.075 -1.108 .269 -.326 .091 PORTFOLIOAT30DAYS -.129 .156 -.055 -.826 .409 -.437 .179 LOAN .029 .023 .081 1.226 .221 -.017 .074 SIZE -.073 .091 -.054 -.796 .427 -.253 .107 DEPOSITERATIO -.198 .182 -.075 -1.090 .277 -.557 .160 NO.OFACTIVEBORROWER -.001 .002 -.055 -.830 .407 -.005 .002a. Dependent Variable: OSS Y=a+bX Y=1.264-0.118X1-0.129X2+0.029X3-0.073X4-0.198X5-0.001X6