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A Composite Framework for Evaluating NBMFIs: Evidence from an Emerging Economy
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Abstract
Non-Banking Microfinance Institutions (NBMFIs) are central to inclusive financial development, yet their long-term viability in developing economies remains an under-examined concern. This study constructs a composite Sustainability Index tailored to Bangladesh’s microfinance landscape, drawing on a multidimensional framework that integrates operating performance ratio, depth of outreach, and breadth of clientele. Utilizing the TOPSIS methodology, sustainability scores are calculated for 50 Bangladeshi NBMFIs across two institutional categories. The analysis reveals wide variation in sustainability performance, with scores ranging from 0.97 to 0.20. To understand the drivers of this divergence, the study estimates a multiple regression model linking sustainability to internal financial and operational metrics. Total Loan Portfolio (TLP) and Deposits Mobilized (DPM) emerge as positive predictors of sustainability, while Leverage (LEV) and Portfolio at Risk (RISK30) exert significant downward pressure. These results not only highlight the dual imperative of financial efficiency and risk control but also offer a diagnostic tool for regulators, donors, and institutional managers. The index framework is generalizable and offers potential applications for comparative assessments across regions and time.
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