Universal Journal of Accounting and Finance Vol. 12(4), pp. 109 - 127
DOI: 10.13189/ujaf.2024.120402
Reprint (PDF) (1201Kb)

The Relationship between Debt Financing and Financial Sustainability of Microfinance Institutions: A Meta-analytical Review

Muleye Tarekegn ^1,*, Gurudutta P. Japee ^2
1 School of Commerce, Gujarat University, India
² Department of Advanced Business Studies, Gujarat University, India

ABSTRACT

This paper uses a meta-analytical approach to synthesize conflicting studies and identify the causes of these discrepancies in order to shed light on the connection between debt funding and financial sustainability. The analysis synthesized 136 effect sizes from 98 studies to examine the role of debt financing on the Microfinance institutions' (MFIs) financial sustainability. As a result, loan funding was discovered to have a negative influence on MFIs' financial sustainability, as demonstrated using random effects models, which supports the Pecking order theory that holds that a high dependency on debt financing could signal that the MFI is having difficulty generating sufficient internal funds, which could negatively impact sustainability. This negative relationship holds across all the proxies used to measure debt financing and financial sustainability. Moreover, this negative association between debt financing and microfinance institution sustainability appears to be somewhat independent of geographic (Africa, Asia, Global) and economic contextual factors (developing and underdeveloped) or the key methodological features of primary studies, including research design, data sources utilized, and the number of MFIs included in their study. The results of this study have significant implications that can contribute to both academic research and practical applications.

KEYWORDS
Debt Financing, Microfinance Institutions, Operational Self-sufficiency, Financial Self-sufficiency, Meta-analysis, Moderator variables

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Muleye Tarekegn , Gurudutta P. Japee , "The Relationship between Debt Financing and Financial Sustainability of Microfinance Institutions: A Meta-analytical Review," Universal Journal of Accounting and Finance, Vol. 12, No. 4, pp. 109 - 127, 2024. DOI: 10.13189/ujaf.2024.120402.

(b). APA Format:
Muleye Tarekegn , Gurudutta P. Japee (2024). The Relationship between Debt Financing and Financial Sustainability of Microfinance Institutions: A Meta-analytical Review. Universal Journal of Accounting and Finance, 12(4), 109 - 127. DOI: 10.13189/ujaf.2024.120402.