CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF MICROFINANCE INSTITUTIONS: EVIDENCE FROM PAKISTAN

This article provides new insight to debt financing and financial performance of Pakistan microfinance institutions. For the purpose data of 23 rated MFIs for the period of 11 years from (2004-2014) were analyzed. The objectives of the study were twofold, one, to check the magnitude of impact of debt financing on the depth of outreach and second, to find out the financial performance of these institutions while extending small loans to the poor people. The results reveal that majority of the MFIs employed debt financing but the financial performance confirmed that MFIs earns sufficient returns to pay back their debts and remain sustainable for longer periods. Moreover, the credit methodology impact on leverage and age was found negative while the impact on size was positive. The financial performances were affected positively by credit methodology, age, and size of the MFIs. Both of the dummy variables have no affect on the debt and financial performance of microfinance institutions in Pakistan.