Analytical study on factors affecting sustainable growth of microfinance companies in Trincomalee District

Abstract

This study investigates the factors affecting the sustainable growth of Microfinance companies in Trincomalee District. Microfinance has become an important tool for poverty reduction in Sri Lanka especially in Trincomalee District. Sustainability of MFIs is the key expectations of the investors and other stakeholders in the industry and government and regulatory bodies also concern the sustainability element. So that this paper assesses the factors affecting the sustainable growth of Microfinance companies in Trincomalee District by using sustainable growth as the dependent variable while profitability, interest rate, liquidity and loan default are the independent variables. The researcher used primary and secondary data for conducting the study. Hence, primary data for the study was collected through survey (Quantitative study) through distributing questionnaires among the managers/executives and credit field officers from respective two leading MFIs in Trincomalee District. Univariate, bivariate and multivariate statistics were used to analyze data. Under Univariate statistics, mean, median, mode, standard deviation are used. Under Bivariate statistics, correlation analysis is performed to measure the causal relationship between the variables. Multiple regression analysis is performed under multivariate analysis. Reliability and sample adequacy of study was run to ensure the reliability of the study and sample adequacy. According to the study, it found there is a high relationship between profitability and sustainable growth of MFIs. And also the findings expressed that there is a moderate level of relationship between liquidity and sustainable growth of MFIs. Besides it indicates that other factors such as loan default rate and interest rate are the key forces influences on the sustainable growth of MFIs. It is recommended that the management has to formulate the business strategies for increasing the business profitability to ensure the business viability.