Microfinance institutions fostering sustainable development

Abstract

The microfinance sector is considered an important contributor to the expansion of formal financial systems. It plays a significant role in sustainable development. Microfinance institutions (MFIs) as key actors in the microfinance sector require an organizational management framework that facilitates sustainable growth. The objective of this study is to define a balanced MFI sustainability approach that considers financial, environmental, social and governance dimensions as equally important. Through a clustering process, this research establishes the relationship between the various sustainability indicators provided by MixMarket, and it determines different MFI sustainability profiles. This research uses the Kruskal–Wallis method to characterize each group based on outreach, financial and risk indicators. The results show that there is no balance between the different sustainability areas, and lead to the conclusion that it is necessary to promote an integrative approach to foster sustainability management practices in the microfinance industry.