Abstract:
Financial sector plays a key role in the economic development. It is generally
agreed that a strong and healthy banking system is a prerequisite for
sustainable economic growth. Financial sector includes mainly the banking
system and the microfinance institutions in the country. Microfinance
promises to reduce poverty. To achieve this amazing objective Microfinance
institutions have to developed strong enough in financial performance because
donor constancy is not a given. Thus the question is: In what extent the MFIspecific,
industry-specific and macroeconomic factors determinants the Sri
Lankan micro finance industry financial performance from the period 2010-
2015. The study was based on a six years secondary data obtained from annual
reports. Regarding the explanatory variables, operational efficiency ratio, debt
to equity ratio and capital assets ratio affect MFIs financial performance
significantly. The outcome of the study shows that GDP growth rate and the
debt equity ratio have positive relationship. But GDP growth rate statistically
insignificant effect on their financial performance. The capital assets ratio,
debt equity ratio and operational efficiency ratio have statically significant.
The Sri Lankan MFIs policy makers and managers should give high concern
to the expense management and also the government and policy makers should
work combining both poverty decrease and financial self- sufficiency of MFIs.
And also MFIs have to emulate profit-making banking performs by effecting
a sound financial management and good managerial governance to assure their
financial performance and in the long run sustainability.
