Microfinance Institutions Fostering Sustainable Development by Region

Abstract

In the last few years, considerable attention has been paid to microfinance as a relevant participant in the formal financial system, whose target audience is people who are otherwise at risk of financial exclusion. In parallel, sustainability and the promotion of Sustainable Development (SD) are imposed as the theoretical frame when facing any study. This, connected with cultural and organizational dimensions theories, are the analytical framework for the analysis of the relationship between the context of performance in which Microfinance Institutions (MFIs) operate and their activity in promoting sustainability. A holistic approach is necessary to make operational these concepts; for that reason, financial, environmental, social and governance dimensions (FESG), and the balance among them, have to be considered. The main objective of the paper is to explore to what extent MFIs are fostering SD, and how this promotion is performed by region. For the analysis, two different sources of information have been studied: sectoral academic literature that focuses on the different sustainability dimensions, and MIX Market sustainability data obtained from the MFIs. A keyword analysis of the selected papers has been executed to be conscious of the most investigated aspects by region; on the data provided by the institutions, a Kruskal-Wallis H test has been performed to learn what the main Sustainability Indicators (SIs) are that are reported affirmatively. To obtain comprehensive research, a comparative study of the results offers the convergences, divergences and gaps of information in each of the regions. The findings show significant differences depending on the region, and confirm that operationalization should be adjusted at the regional context of the MFIs. The paper, with the inherent limitations due to data quality, also offers recommendations for the better promotion of sustainability in each of the regions.