Economic Development and Breadth of Outreach as Contextual Conditions for Financial Self-Sufficiency: A Configurational Analysis of Microfinance Institutions

This research uses an asymmetric configurational approach to analyse outreach breadth and economic development, considering contextual inputs that shape pathways to financial self-sufficiency among microfinance institutions. Panel data cover 1,295 microfinance institutions from 2009 to 2019 and are sourced from the World Bank (MIX Market) database. The study uses contextual conditions, including breadth of outreach, portfolio at risk, management inefficiency, active borrowers, capital structure, and economic development. The analysis of necessary conditions reveals that no individual condition is sufficient to produce a high level of financial self-sufficiency, indicating that financial self-sufficiency cannot be attributed solely to any single condition. However, sufficiency analysis suggests that outreach breadth is an important core condition for financial self-sufficiency, while economic development is not. None of the individual conditions—breadth of outreach, portfolio at risk, management inefficiency, active borrowers, capital structure, or economic development—met the threshold for a high Financial Sustainability Score (FSS), emphasising that sustainability cannot be sufficiently explained by a solitary factor. From 2009 to 2019, BOTR remained a core condition in the sufficiency analysis. In 2009, 2014, and 2019, active borrowers, outreach scope, and management inefficiency were among the most significant factors across most pathways, underscoring their vital role in underpinning MFI performance. Capital structure, portfolio at risk, and economic development were context- and time-dependent, with their effects being core conditions in some configurations and absent in others. In conclusion, the findings support equifinality and causal asymmetry, as different combinations of institutional and contextual factors can lead an MFI to achieve high financial self-sufficiency.