The performance and sustainability of non-profit MFIs are crucial for increasing financial access to populations excluded from formal banking systems. Despite the essential role of MFIs, limited empirical evaluation exists on the internal inefficiency factors within Malaysian non-profit MFIs. Using Malaysia as a typical example of Southeast Asian countries, this study analyzes the internal factors that largely impact non-profit MFIs. The paper uses Data Envelopment Analysis (DEA) first and then Tobit regression analyses, looking at data from 2009 to 2020, to study how well microfinance institutions in Malaysia are performing and what factors affect their technical efficiency (TE), including how mature the institution is, the number of staff, subsidies, branches, and borrowers. The results indicated that the efficiency level of the Malaysian microfinance institution, as measured by the BCC-VRS model, is 0.968, with inefficiency-driven factors including over-reliance on subsidies, inefficient workforce management, and the institution's maturity. These results demonstrate a complex interplay between internal resources and operational performance, highlighting the difficulty of managing them effectively. Furthermore, this study offers significant policy implications for these firms through the tokenization of their products, calling for a sustainable equilibrium in the long run between enhancing domestic operations and seeking external financial assistance. From a comparative perspective with other Southeast Asian countries, the analysis also highlights the necessity for region-specific strategies. Overall, this study ultimately contributes to the art of policymaking in governance, subsidy management, long-term financial planning, and the social effects of non-profit MFIs in Malaysia.
Abdamia et al. (Thu,) studied this question.