Analysis of financial determinants of microfinance institutions (MFIs) in Zimbabwe

Abstract

The purpose of this study is to analyze the determinants of microfinance institutions’ (MFIs) financial performance in Zimbabwe. In many parts of the world, MFIs have become a tool for poverty alleviation by providing the poor with access to savings and credit services. Formal banks tend to quote this population as unbankable since they lack tangible collateral. In recent years the microcredit sector was overtaken by the informal sector. The sector is recovering due to the adoption of dollarization. Due to the evolution in microcredit sector, the determinants of financial performance remains questionable and unanswered. The research study found different factors which influences the financial performance and these included MFI specific factors and macroeconomic country specific factors. The model in the study shows the financial performance of 189 registered microfinance institutions in Zimbabwe is highly affected significantly by both microeconomic and macroeconomic factors. The study used OLS regression technique in analyzing the relationship between changes in the response variable (ROA) and change in the predictor variables for the period of five years (2013-2017). The regression model was statistically significant which guarantees reliability and validity of the results. Future scholars should consider other macroeconomic elements like foreign exchange rate, population growth, interest rate, GDP per capita among others in their study.