TITLE:
The Performance of Ethiopian Microfinance Institutions in Balancing Social Responsibility and Financial Sustainability
AUTHORS:
Mitiku Zena Shifa, LaJuan Perronoski Fuller
KEYWORDS:
Business Model, Financial Sustainability, Institutional Theory, Microfinance Institution, Nongovernmental Organization, Nongovernmental Organization-Microfinance Institution, Social Responsibility (Sustainability)
JOURNAL NAME:
Modern Economy,
Vol.13 No.10,
October
11,
2022
ABSTRACT: The lack of loanable funds exposes historically marginalized
societies, such as women, lower-income earners, and rural communities, to
situations in which an informal village lender charges exploitative interest
rates. The reprioritization of microfinance
institutions toward financial sustainability at the expense of social responsibility is a contributor to this
problem. This study was an evaluation of the relevance of the business
model in measuring performance and comparing the measurement of the balance of
social responsibility and financial sustainability by microfinance institutions
in Ethiopia. A quantitative research method
was used to collect data and one-way analysis of variance was used to compare
the business models. The results showed that business models made a
difference in measuring the social responsibility performance of microfinance
institutions. Nongovernmental and governmental microfinance institutions did not show significant difference in balancing
social responsibility and financial sustainability. The two business models
were more low-income oriented than
were commercial microfinance institutions. The leaders of microfinance
institutions and partners should not rush to commercialization but should
design and implement a suitable business model that balances social
responsibility and financial sustainability without significantly sacrificing one to the other. Hence, local, and
international development agencies can
enter into partnership with nongovernmental or governmental microfinance
institutions to reduce poverty.