Determinants of Microfinance Resilience in OIC Countries: An Analysis of Institutional Quality, Financial Infrastructure, and Operational Efficiency

Abstract

This thesis investigates how institutional quality, financial infrastructure, and operational efficiency collectively determine the resilience of microfinance institutions (MFIs) in Organization of Islamic Cooperation (OIC) countries. Operating in environments characterized by unique challenges, microfinance institutions (MFIs) in these regions must navigate varying levels of institutional development, financial infrastructure, and operational constraints while balancing financial sustainability with social missions. The research addresses critical gaps in understanding the complex interplay between these factors, particularly in predominantly Muslim societies. The study employs a mixed-methods approach, combining robust econometric analysis of panel data from 41 OIC member countries over the period 1999-2019 with a qualitative case study of Akhuwat, Pakistan's interest-free microfinance institution. The econometric analysis utilizes fixed effects models to examine how institutional dimensions, infrastructure development, and operational practices affect key performance metrics while controlling for unobserved heterogeneity across institutions. The complementary case study provides deeper insights into the mechanisms through which MFIs can achieve remarkable resilience despite challenging institutional environments. The findings unveiled different patterns of resilience determinants. While rule of law consistently enhances MFI performance, regulatory quality, and corruption control show mixed or counterintuitive effects. Surprisingly, financial infrastructure development demonstrates negative relationships with profitability metrics, suggesting complex competitive dynamics in evolving markets. Operational efficiency emerges as universally beneficial regardless of institutional context, indicating significant agency for MFIs in shaping their performance through internal practices. Dynamic panel analysis further reveals strong performance persistence, highlighting path dependency in microfinance development trajectories. The thesis contributes to the literature by developing a comprehensive framework for understanding microfinance resilience in Islamic contexts and offering policy recommendations for enhancing MFI sustainability. These insights can guide policymakers, regulators, and practitioners in designing more effective interventions that recognize the interplay between governance environments, infrastructure development, and operational practices in boosting the resilience of MFIs across OIC member states.  

Date of Award	2025
Original language	American English
Awarding Institution	HBKU College of Islamic Studies